Sun, Mar 15, 2009 page8

• EDITORIAL: DRAM firms must admit mistakes

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  Last week, several executives at local computer memory companies were shocked at remarks made by the government’s designated semiconductor czar for the struggling industry, who said government-funded Taiwan Memory Co would focus on seeking technological alliances with foreign chipmakers and that it would purchase factories from local chipmakers, but not pursue an outright merger.

  The executives were further frustrated when the Ministry of Economic Affairs said local companies that produce dynamic random access memory (DRAM) chips would have to solve their own financial problems and not rely on Taiwan Memory or the government.

  Of course, the executives were disappointed and angry because the government’s policy is very different from what most people had expected when it launched Taiwan Memory. With the policy change, local DRAM companies will likely receive no government funds to bail them out of the current mess.

  Whether the cause of the policy change was over concerns about complicated mergers or simply misunderstanding and miscommunication, the government shoulders the blame for allowing DRAM companies to harbor unrealistic expectations on a government rescue for the past months — up until last week.

  But what really mattered was that the government made it clear that it was not its responsibility to rescue individual companies using taxpayers’ money.

  Moreover, it has become evident that chipmakers should assume the responsibility for the losses they have generated over years of expansion and oversupply. These companies owe an apology to their shareholders and investors, especially now their shares are little more than penny stocks and their debt is rising continuously.

  Unfortunately, we have not heard any of these firms apologize to shareholders and investors. The companies continue to blame everyone but themselves.

  Previously, they criticized the government for restricting their investments in China. Then they attributed years of oversupply and falling prices to volatility in the highly cyclical industry. Recently, they blamed a lack of liquidity in the banking sector for their financial difficulty.

  Ironically, despite all of their obvious misjudgments and bad management, most executives at these DRAM companies have not compromised their compensation packages to cope with a slowing business, but left employees, shareholders and investors to pay a hefty price — job losses and falling share prices.

  Everyone makes mistakes and bad decisions. Even US billionaire Warren Buffett made investment mistakes — especially in financial derivatives — that saw his Berkshire Hathaway Inc record its worst ever financial results last year.

  But Buffett apologized to shareholders in his annual letter on Feb. 27, admitting that he did some “dumb things” last year and made “at least one major mistake ... and several lesser ones that also hurt.”

  While many of Berkshire’s losses last year were unrealized on long-term derivatives contracts and the firm predicts that the contracts will ultimately be profitable, Buffett did not try to escape responsibility.

  “If we lose money on our derivatives, it will be my fault,” he said in the letter.

  Taiwan’s DRAM companies do have the right to criticize the government’s change of policy. But given the industry’s gloomy prospects and their rising debt, no one can deny that the time has come to address the issue of a graceful exit from the business.

  Instead of pointing fingers at others, the companies should face up to their own mistakes and offer an apology to shareholders and investors.
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