Powerchip shares jump on hopes of Elpida help

TAIPEI (Reuters) - Shares of Powerchip Semiconductor Corp (5346.TWO), Taiwan's top DRAM chip maker, jumped more than 4 percent on Friday on hopes it may get financial support from Japan's Elpida Memory Inc (6665.T).

At 9:20 p.m. EST, shares of Powerchip, a manufacturing partner of Elpida, rose 4.1 percent to T$3.58, defying the main TAIEX's .TWII 0.5 percent fall after sharp losses on Wall Street.

Elpida said on Thursday it is considering expanding its capital tie-up with Powerchip, depending on the state of Powerchip's balance sheet. The Chinese-language Commercial Times quoted unnamed sources from Elpida as saying on Friday that Elpida will likely buy new shares to be issued by Powerchip and boost its stake in Rexchip, its joint venture with Powerchip.

The Powerchip spokesman could not be reached for comments.

"First, by expanding its stake in the Rexchip JV, the Elpida move could lighten the funding burden and/or debt guarantees of Powerchip," Deutsche Bank wrote in a note on Thursday.

"Second, by helping alleviate the uncertainty over Powerchip and the sustainability of its Elpida relationship, the company's technological future seems more secure."

While both Elpida and Powerchip are struggling in the battered DRAM industry, Deutsche Bank said the Elpida move should make the Taiwan company a better credit risk for banks contemplating the extension of maturing debts.

Deutsche Bank upgraded its rating on Powerchip to "buy" from "hold" and gave a target share price of T$5.64.

(US$1=T$32.8)

(Reporting by Baker Li, Editing by Keiron Henderson)