ProMOS receives bail out from creditors

Taiwanese DRAM maker ProMOS has been given a lease of life following a bailout by bank creditors.

It has been reported that the memory manufacturer has struck a deal to swap half of its debts for equity in a bid to save the ailing firm.

With many of the 30 creditor banks thought to be government backed, it appears that assurances from Taiwanese authorities that ProMOS will get all “necessary assistance” it needs have been acted upon.

ProMOS had already been told to slash its capital by 85 percent recently, and it is at least hoped that the firm can start rebuilding with the help of its creditors, writes Focus Taiwan.

The deal means that creditors have agreed to swap $971 million of the total $1.97 billion debt in exchange for equity in the company.

They will also lower interest rates from 3.5 percent to 0.1.

In return ProMOS will have to outline how it plans to get itself back on its feet, with a demand that a new management team is put in place next year to get it on the right track.

But whether or not this is enough to reverse the fortunes of the DRAM maker is quite unclear at this point.

Shares of ProMOS jumped following the news of the bailout, but it does not mask the precarious situation that many DRAM manufacturers are in with the current market situation.

And it is not the only firm that is struggling with the price drops in DRAM.  Domestic rivals Nanya and Inotera have also been enduring a torrid time of late.

Both Taiwanese DRAM makers reported losses recently as the demand for DRAM drops in the face of rise in popularity of mobile devices such as tablets and laptops, which tend towards NAND flash memory use.

DRAM maker Elpida recent change of tack was symbolic of the change in emphasis, pushing substantial funds into its own NAND flash production.

And with Samsung in a dominant position, there are talks in Taiwan of another attempt to team up the island’s DRAM firms to stand a better chance of survival.

Kingston’ David Sun was one who has called an alliance to fend off Samsung.

John Hsuan at UMC also made noise recently about a DRAM alliance, having been part of a failed attempt in 2009.  However he ruled himself out of leading any such cooperation between the island’s firms.

There are hopes that as more firms move to a 30 nanometre process later this year there will be a greater demand for DRAM products.

But at the moment the slow demand for desktop PCs is threatening to drag down the DRAM market. Indeed firms away from Taiwan are also feeling the strain with Hynix seeing a drop in profits last week.

As if this was all bad enough for the DRAM market, it has also been noted recently that NAND flash could be used in the mainstay of DRAM usage, desktop PCs.

So there is certainly plenty of cause for concern for the DRAM market in both the short and long term.