Taiwan's Winbond Electronic Corp's (華邦電子) revenue for September show sales nearly doubled compared with the same month a year ago, but fell nearly 15 percent compared with August's record high due to slowing PC demand and falling prices for some memory chips.
Winbond, which released the figures on Monday, makes dynamic random access memory and flash memory. Revenue for September came in at NT$4.76 billion, down from NT$5.58 billion in August, and the lowest in the third quarter.
Winbond blamed the revenue decline on shrinking demand in the PC market and depressed DRAM spot prices. Revenue in the first nine months of the year came to NT$36.84 billion, up nearly 91 percent over the same period a year ago. Analysts are predicting the company will make about NT$55 billion in revenue this year.
Since Winbond announced its record high revenue in August, world number one chipmaker Intel and PC makers Apple and Dell have warned that profits won't be as high as expected due to weaker than expected PC demand. PCs are the principal users of DRAM. According to Winbond, about 60 percent of its revenue comes from DRAM sales.
Meanwhile, the spot price for 64 Mbit dynamic random access memory chips has fallen by more than 30 percent since its third quarter high of US$8.96 in mid-July. Falling DRAM contract prices can subtract millions of dollars from DRAM producers' profits. The spot-price is used as a gauge to determine the contract price.
Concerns about the effect of slowing PC demand on Winbond's revenue have caused its share price to fall by ,pre 60 percent since it peaked in June this year at NT$106.50. It closed on Monday down 3.4 percent for the day at NT$42.30.
Despite the gloomy outlook, a report released by Dataquest on Monday predicted that semiconductor chip sales would grow by 37 percent this year, and would continue to grow over the next two years.
Jim Handy, an analyst at Dataquest, said that the drop in memory prices was more likely a temporary phenomenon than evidence that the chip industry was already in decline. PC makers had built up a "war chest" of memory chips in anticipation that prices would rise sharply this year. "Everyone, ourselves included, was forecasting a capacity equilibrium in the second half," he said. Instead, slowing PC demand has resulted in an oversupply of memory chips and other components in PC makers' inventory. Handy predicted that memory prices will rise somewhat during the first quarter of next year.
Despite the uncertainty over the future direction of memory chip prices, Winbond anticipates room for increasing profit margins by reducing production costs. These will fall substantially in October after 60 percent of total DRAM output migrates to 0.175 micron technology, the company said Monday. Bar specific customers, the company also said all production technology will be moving over to 0.175 micron technology in the fourth quarter.
Winbond also said sales of digital audio and video IC products experienced considerable growth in September due to increased market demand.
Analysts predict that the company's diversified product line, with a focus on flash PC, multimedia, and liquid crystal display drivers, will provide some protection for its revenue base against a possible slump in the DRAM market.
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