20111212 EDITORIAL: Government makes right policy call

EDITORIAL: Government makes right policy call

The government has finally started to listen to local corporations and show some flexibility. The polices unveiled last week to boost funding for the ailing LCD, DRAM, LED and solar industries will provide many companies with a much-needed lifeline and signal a reversal of the government’s previous insistence on consolidation.

In addition, the Bankers Association of the Republic of China passed a proposal on Friday to extend loan periods for borrowers that the Ministry of Economic Affairs designates as qualified. This provisional regulation is aimed at helping firms weather the economic slumps in the eurozone and the US — two of the nation’s major export destinations — by allowing firms to receive payment extensions after securing approval from banks that account for two-thirds of their credit, as opposed to the previous practice of a unanimous decision.

The relaxed loan extension rule, which will remain in effect until June, is a more practical way to rescue companies; relying on growth potential, rather than mergers and acquisitions.

It also ensures that lenders avoid the accumulation of bad loans because borrowers are expected to generate more cash from their operations with which to repay their debts after regaining strength, particularly as the global economy picks up next year.

However, LCD and DRAM companies will only remain good investments if they are able to focus on developing new technologies and better identify niche products.

Another encouraging development last week was the Ministry of Economic Affairs’ announcement on Tuesday that it would inject US$5 million into a joint project between Intel and the Industrial Technology Research Institute (ITRI) to develop next-generation DRAM technologies.

ITRI’s Information and Communications Research Laboratories general-director Wu Cheng-wen (吳誠文) said the project would enable Taiwanese PC DRAM chipmakers to produce more value-added chips utilizing existing technologies and would not require a major investment in new equipment.

With its strong research team and financial support, ITRI plays a key role in developing cutting-edge technologies and transferring them to private firms. This project, with a total investment of US$15 million, seeks to find an optimal structure for so-called 3D chips, which integrate logic chips with memory chips on a substrate. The 3D chips will be mostly used in ultra-thin mobile devices, such as smartphones and tablets, sales of which are expected to continue to surge over the next few years.

This could explain why local memorychip company Powerchip Technology is reluctant to give up its PC DRAM chip business, despite shifting its focus to niche NAND and DRAM chips.

“Powerchip will continue to manufacture DRAM memory chips for certain customers because the technology is very important in developing 3D ICs [integrated circuits],” Powerchip chairman Frank Huang (黃崇仁) said last month.

In addition to Intel, a number of global heavyweights in the chip industry, including the world’s No. 1 contract chipmaker, Taiwan Semiconductor Manufacturing (TSMC), are developing 3D IC technology to produce smaller chips.

TSMC said during the past two years it has collaborated with a global DRAM company to develop 3D chips, while local rival United Microelectronics is working with Japanese memory company Elpida Memory and local memory chip packager Powertech Technology.

In this instance, government financial assistance for the development of new DRAM technology is the right decision and helping local firms secure credit will give them more time to revive their businesses.