Taipei, Dec. 31, 2008 (CENS)--The Ministry of Economic Affairs (MOEA) yesterday decided to reject a bailout plan forwarded by DRAM chipmaker PowerChip Semiconductor Corp. (PSC) in light of the company`s commitments falling far short of government expectations.

PSC filed the proposal on Dec. 26 to request over NT$40 billion (US$1.2 billion at US$1:NT$33) as rescue money for its struggling finance.

People familiar with the situation pointed out that the disagreement mostly results from PSC`s pledge to only set up a research and development center in Taiwan with the money, which is far short of the government`s demand that the bailout fund must help DRAM technology root in Taiwan, boost international competitiveness of Taiwan`s DRAM industry, and maximize the effect of the government investment.

Not only MOEA but also ProMOS Technologies Inc., which PSC is planning to acquire as part of its plan to boost competitiveness, declined to sign on the dotted line of the proposal.

The ministry also decided to ask PSC to revise its proposal and submit it again. Industry watchers interpreted the government rejection as the sign that the combination planned by PSC and Elpida with ProMOS and Rexchip Electronics Corp. could fail.

Eric Tang, PSC`s vice president and spokesman, said his company will continue negotiating with the government to revise the bailout proposal that can meet government expectations as much as possible.

Industry watchers pointed out that the major difficulty behind the disagreement between the government and PSC is that Elpida, PSC`s technology licenser, is reluctant to provide its technology to help Taiwan`s DRAM industry while the government is not likely to offer bailout for a chance that could help a foreign chipmaker control Taiwan`s DRAM industry without much cost.

Premier Liu Chao-shiuan yesterday said the government will finalize rescue plan to the island`s DRAM chipmakers before the upcoming Chinese New Year.
(by Ken Liu)