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DRAM bailouts seen as a 'disaster'

SAN JOSE, Calif. -- The government in Taiwan--and possibly Korea--may seek to bail-out the failing DRAM makers in those nations, but an analyst warned that such an action would be a ''disaster'' for the industry as a whole.

In Taiwan, DRAM maker Powerchip Semiconductor Corp. is pleading for a bailout from the Taiwanese government, while ProMos Technology Corp. and Nanya Technology Corp. are reportedly seeking similar measures. Powerchip's partner, Elpida Memory Inc., may end up rescuing the company via an acquisition.

In Korea, Hynix Semiconductor Corp. is seeking help from its creditors, but there are conflicting reports that the company is seeking a bail-out from the government. And in Germany, Qimonda AG could ask for help.

One analyst warned against such measures. ''News continues to show the dire financial situation that most of the vendors are in, with speculation that governments will step in to support the manufacturers,'' said Andrew Norwood, research vice president at Gartner Inc., in a report.

''Widespread government support for the industry would be a disaster: It would just prolong the current downturn rather than forcing the vendors to further reduce production or causing consolidation,'' he said.

Indeed, the DRAM market is terrible. ''Price declines were less last week than the previous few weeks, but given that pricing is now so low for the 1-Gbit density device, there cannot be much opportunity for further declines,'' he added.