"Elpida does have good technology, as does Hynix, Micron, Samsung, and even Qimonda," he said. "Having good technology is not saving Qimonda, however. A company's revenue level is the single most important thing if it is close to the current US$2.5 billion lower threshold."

Taiwan's decision to use TMC to consolidate its DRAM industry came amid a global recession that has seen other nations such as the U.S. spend billions of dollars bailing out banks and corporations such as auto makers. Taiwan may be the first to agree to a technology industry bailout, but it faced few palatable choices.

A memory chip glut caused DRAM companies globally to start posting losses nearly two years ago and their problems have worsened with the global recession. Although companies have cut back on chip production and shut older factories, falling demand for PCs, where most DRAM chips go, have further hurt the market, and new loans to finance factory improvements have become difficult to obtain.

Earlier this year, Taiwanese officials said they had to do something about their DRAM makers because they hold so much debt, an estimated NT$430 billion, much of it owed to Taiwanese banks. A DRAM default could add to woes to the island's financial industry.