In a recent report on the Taiwan semiconductor market, the U.S.-Taiwan Business Council calls on the Taiwan government to "move forward with a fair and equitable consolidation of the DRAM industry."

The report, "Taiwan Semiconductor Report — Q2, 2009," cites rumors that John Hsuan, the United Microelectronics Corp. (UMC) executive who was picked to head TMC, wants out of the venture. The report notes that the mandate for TMC has changed multiple times since it was first proposed and said Hsuan has avoided public comment on the rumors.

The government of Taiwan proposed in March to help bail out the island's DRAM industry, including the consolidation of DRAM makers into TMC. But the DRAM makers balked, and the government yielded to public criticism by changing the plan to make TMC an R&D firm mandated to turn Taiwan into a technological powerhouse in the DRAM industry, according to the U.S.-Taiwan Business Council report.

Even if this plan succeeds, Taiwan's DRAM makers would need a massive cash injection to upgrade their production lines to the latest technology before they can move forward, according to the report.

DRAM spot prices have risen over the past several months, but Taiwan DRAM vendors still have considerable mothballed production capacity that can be brought online and flood the market with chips if the firms are looking to increase short-term revenue, the group warned. Such a scenario would negatively impact the improving DRAM revenue picture.