Nanya Technology Corp. (2408.TW) said Thursday its partner Micron Technology Inc. (MU) has informed the company that it won't cooperate with Taiwan Memory Co. for technology development.

The move is a major setback for Taiwan Memory, a new chip company being established with government funds in Taiwan, as it has sought to secure key technology from the U.S. and Japan to enhance competitiveness in manufacturing dynamic random access memory chips for personal computers.

"We are afraid that joining Taiwan Memory will risk losing some of our technologies to Elpida," said Fred Fishburn, an official appointed by Micron to serve as assistant vice president of technology and product engineering at Inotera Memories Inc. (3474.TW).

Inotera is a 50-50 joint-venture of Micron and Nanya.

Instead, Fisburn said Micron will pursue closer ties with Nanya and Inotera for technology development.

Boise, Idaho-based Micron had been in talks with Taiwan Memory for possible technology cooperation. But last week, Taiwan Memory chose Elpida as its technology partner.

John Hsuan, a chip industry veteran appointed by the Taiwan government to set up Taiwan Memory, had said previously that it would still continue talks with Micron despite a deal with Elpida. In a statement Tuesday, Hsuan said he respects Micron's decision.

Nanya Chairman Chia Chau Wu said at a press conference the company still hopes to get government funds. Nanya had submitted a proposal for financial aid from the government in February.

"We hope the Taiwan government will offer us the same support it gives to Taiwan Memory," said Wu.

Wu said both Nanya and Inotera, which have posted hefty losses due to a plunge in chip prices, will get financing from Nanya's parent company, Formosa Plastics Group.

But "we need the government's help to accelerate our technology development," said Inotera President Charles Kau.

Micron and Nanya have an exclusive 10-year agreement in joint technology development that includes 30-nanometer chip production.

Nanya and Inotera plan to gradually convert their production technology to more advanced 50-nanometer technology licensed by Micron starting August, from current 75-nanometer and 68-nanometer technologies, Kau said.

Micron and Nanya plan to set up a production technology research and development center in Taiwan focusing on 18-inch wafer related technologies, Wu said.

In addition to commodity dynamic random access memory chips, Micron plans to develop other products such as NAND flash memory chips and specialty DRAM chips in Taiwan, Fishburn said.

-By Jessie Ho, Dow Jones Newswires; 88622 502-2557; jessie.ho@dowjones.com