Elpida Memory Inc. said Wednesday it is in talks with three Taiwanese semiconductor makers, including Promos Technologies Inc., with an eye to management integration and other options to strengthen their financial standing as the industry combats plummeting prices of memory chips.
Elpida, the world's third-largest maker of dynamic random-access memory chips for personal computers, and the Taiwanese companies hope to reinforce their weak financial bases by seeking public funds from the Taiwanese government.
The two other Taiwanese firms are Powerchip Semiconductor Corp., the world's sixth-largest DRAM maker and Rexchip Electronics Corp., a joint venture firm between Elpida and PSC. Promos is the world's eighth-largest DRAM maker.
A merger of the four entities would create the world's second-largest DRAM manufacturer in turnover, behind South Korea's Samsung Electronics Co.
An Elpida official said the negotiations began at the end of last year and the companies are expected to reach a conclusion soon in view of the dire condition of the global semiconductor industry, which has been hit hard by a drop in demand due to the worldwide economic downturn.
Observers said the merger may also help to relieve the semiconductor oversupply, which is often considered another key cause of the industry's woes, while it may also trigger an industrywide realignment as chip makers seek to weather the worsening business conditions.
The Taiwanese government is considering providing financial assistance to the cash-strapped chip makers, considered pivotal in driving the nation's growth.
Meanwhile, Elpida has also logged ¥45.64 billion in group net losses for the April-September period of 2008 and has been seeking to improve its finances by strengthening ties with the Taiwanese semiconductor makers.
Once Elpida reaches a deal to merge with the three companies, it plans to apply for the Taiwanese government loans, sources close to the negotiations said.