UPDATE 1-Two firms in due diligence on Taiwan ProMOS plant-sources

* Due diligence "almost done" -sources

* MOU could be signed in March -sources

* ProMOS's plant would be used for niche chips -sources (Adds comment, details)

By Faith Hung

TAIPEI, Feb 7 (Reuters) - Two potential buyers for Taiwanese memory chip maker ProMOS Technologies' 12-inch wafer fab are set to finish due diligence this month, according to two sources with direct knowledge of the situation, as the company edges towards a solution to its huge debt burden.

ProMOS has a $1.9 billion debt burden and has been unable to produce its earnings. Its shares have been suspended from trade since Sept. 6. It has been given low-interest loans by creditor banks at government prodding while it looks for a way out.

Its problems have become a symbol of the state of Taiwan's dynamic random access memory (DRAM) industry, which is struggling to keep afloat amid falling prices and stiff competition even as makers have to spend big on investment.

The potential buyers have "almost finished" checking ProMOS's books, and are close to a decision on whether to buy the facility, one of the sources told Reuters on Tuesday.

Should a buyer emerge, a memorandum of understanding could be signed in March, said the other source. However the source cautioned against to much optimism.

"Any sale, if reached, would be difficult as the industry has been in a slump. The interested parties are looking to whether it is possible to make niche products at the plant," said the source, referring to NAND chips and others.

"Having said that, there should be a buyer, totally subject to price and strategy," added the source.

Both sources asked not to be identified due to confidentiality agreements. They declined to identify the potential buyers.

ProMOS officials were not immediately available for comment.

Contract chipmaker Global Foundries, owned by an Abu Dhabi state fund, and Taiwan's UMC are two of the names that have been mentioned as potential buyers or investors in ProMOS. UMC has declined to comment.

Elpida Memory was also on the list but many think this is unlikely because the Japanese company lost $575 million in the October-December quarter and was likely to post a $1.58 billion net loss for the year to end-March, according to media reports in Japan last week.

DRAM memory chip makers globally are struggling as falling prices and huge investments to stay competitive saddle them with massive losses, forcing them to consider steps such as tie-ups to gain scale, move into higher-value chips or seek financial help.

Taiwan's makers have posted combined total losses of some T$215 billion ($7 billion) since 2007 and have only a combined 7 percent of the market for the chips, used in PCs, versus 45 percent for industry leader Samsung Electronics. (Editing by Jonathan Standing)