Taiwan DRAM shares rally on government rescue

TAIPEI (Reuters) - Shares of Taiwan's DRAM makers rallied on Wednesday, after the government said it would help the struggling domestic industry develop more local technology and boost its global competitiveness.

Powerchip (5346.TWO), the island's largest memory chip maker, and smaller rival Nanya Technology (2408.TW) ended up 1.93 percent and 3.9 percent, respectively, on Wednesday, outperforming a 0.67 percent rise of the benchmark TAIEX .

Shares of the island's third-largest DRAM maker ProMOS (5387.TWO) surged by their daily 7 percent limit after media reports on Tuesday said U.S. Micron Technology MU.N President Mark Durcan was set to talk with Taiwan government officials about a possible tie-up with ProMOS.

Taiwan officials confirmed they had exchanged views with Micron executives late on Tuesday but did not provide further details. [nTP199281]

Citigroup approved of the government's move but expected no significant rebound for shares of local dynamic random access memory (DRAM) chipmakers and encouraged further consolidation among the sector. "Absent a sharp price rebound, Taiwan players may need to become subsidiaries of Japan/U.S. firms to keep pace with Samsung's technology migration," Citigroup analyst Timothy Lam wrote in a research note to clients on Wednesday.

The U.S.-Taiwan Business Council, meanwhile, said in a note that "while the council does not favour nationalisation of Taiwan chip companies, such assistance is imperative to inject needed liquidity and to safeguard the future of this vital sector during the global recession."

(US$1=T$32.7)

(Reporting by Gina Chang; Editing by Ken Wills)