Macronix profits drop 69 percent

Macronix International Co (旺宏電子), the world's top maker of the memory chips used in computer printers and game machines, said second-quarter profits dropped 69 percent year-on-year due to slowing worldwide demand for electronics goods.

The company posted net profit of NT$500 million (US$14.3 million) for the three-month business quarter ending June 30, down from NT$1.6 billion (US$46 million) during the same period last year.

Macronix president Miin Wu (吳敏求) said that although he expects earnings in the third quarter to be slightly better than the second, a full semiconductor industry recovery will not come until the second half of next year.

The dotcom companies responsible for sending chip sales skyrocketing last year are now gone, so the market will have to wait for sales of computers and communications products to soak up excess supply, he said.

Macronix designs and manufactures memory chip products for mobile phones, computer printers and game machines. In the third quarter, analysts believe sales of Nintendo's Game Cube should spur demand for Macronix's Mask-ROM (read only memory) memory chips. These chips also go into Hewlett-Packard Co printers and store information like software and data even when a device is shut off.

The company also announced a new digital camera controller chip for use in Minolta Dimage 7 cameras yesterday, which converts each image into digital form before saving it in memory.

Wu said his firm expects to ramp up production on these new chips in two or three months, at a rate of 300,000 chips per month.

Despite the new products, Wu expects his company's utilization rate, which gauges the amount of chip manufacturing lines actually churning out products, to fall from 90 percent during the first half of the year to 70 percent in the third quarter.

"The company seems determined to sacrifice short-term profits in order to develop their own products ... [but] I think the company is on the right track in developing their own intellectual property," said Chris Hsieh, semiconductor analyst at ING Barings in Taipei.

Many of Macronix's products are special-order-chips for use in specific products, such as flash memory for cellphones and Mask-ROM memory for game machines and printers. Macronix designs many of these products to customer specifications.

Due to its emphasis on memory chips, Macronix tends to be lumped together with other memory chip makers like Micron and Samsung -- but these companies make a very different kind of memory chip.

Micron and Samsung produce DRAM memory chips, predominantly used in computers and sold as commodities on open markets in the same fashion as oil. The memory products Macronix makes are not sold as commodities.

Hsieh warned that a change in technologies to third generation mobile Internet-capable cellphones by one of Macronix's biggest customers, Mitsubishi, could take away orders for flash memory and 4 megabit SRAM chips from the firm later this year. Competition from Powerchip Semiconductor Corp (力晶半導體), another Taiwanese manufacturer, is also likely to catch on by the end of the year.