Fri, Dec 20, 2002 - Page 10 News List

Nanya revises its forecast for a second time

MEMORY CHIPS Taiwan's top manufacturer in the sector can't seem to get its net-income forecast right because prices keep falling

By Bill Heaney  /  STAFF REPORTER

Nanya Technology Corp's (南亞科技) crystal ball appears to be defective. Taiwan's largest manufacturer of computer memory chips slashed its net-income forecast for this year by almost NT$2 billion yesterday, the second major revision this year.

The firm's misreading of the memory-chip market began in April when the company predicted it would net NT$11.23 billion this year, only to cut that forecast by more than 50 percent in August to NT$4.51 billion. The company slashed the August estimate by a further 44 percent to NT$2.52 billion.

"Nanya was previously too aggressive with their predictions," said Rick Hsu (徐禕成), an analyst at Nomura International in Taipei.

Hsu was less optimistic, predicting in October that Nanya's net income for the year would come in at US$2.2 billion when the company was still insisting on US$4.5 billion.

Memory chips are used for short-term memory in devices as varied as computers and answering machines.

Nanya's optimism was based on the average selling price of the current mainstream memory chip -- 256Mb double data rate (DDR) dynamic random access memory (DRAM).

"Our previous forecast was too high," Nanya's spokesperson Charles Kau (高啟全) told the Taipei Times yesterday. "It was based on an expected average selling price of US$7.50 per chip in the fourth quarter, which was in fact US$6.50."

Hsu, however, suspects that Nanya had been basing its forecast on prices as high as US$9 per chip. Those prices appear to wishful thinking.

"We won't see a quick rebound -- not until mid-2003," Hsu said.

But he expects supplies to increase as producers in South Korea and Taiwan pump out more products, while demand is likely to be muted after the holiday season, further depressing prices.

Second guessing

* Nanya Technology said in April that it would net NT$11.23 billion this year.

* It then cut that forecast by more than 50 percent in August to NT$4.51 billion.

* The company has now slashed the August estimate by a further 44 percent to NT$2.52 billion.

One glimmer of hope for next year may come if Intel Corp adopts the DDR 400 chip -- a faster and more expensive memory chip for its new systems -- next year.

Currently 266MHz DDR, or DDR 266, is the standard.

Memory-chip makers will have a window of about three months when prices will stabilize as the major players adjust their production processes to put out the new chip.

"Manufacturers who put out DDR 400 early will be the winners," Hsu said.

Nanya may be banking on a new, more efficient US$2.2 billion production plant that it is building in Taiwan with Germany's Infineon Technologies to help its bottom line next year.

"Nanya's 12-inch fab won't go on-line until the end of 2003, so it will not make any contribution to profits next year," said James Huang, (黃建銘), an analyst at SinoPac Securities Corp (建華證券).

Nanya and Infineon broke ground on the new plant at the beginning of December.

The stock market's reaction to the report was lukewarm, with Nanya's shares closing down 2.4 percent to end at NT$20.6. Shares in Nanya have fallen 42 percent this year.

Both Hsu and Huang are not recommending that investors buy DRAM-maker shares as long as chip prices continue to fall.

Others in the sector are faring even worse than Nanya.

On Wednesday, Micron Technology Inc, the US' only memory chipmaker after Texas Instruments Inc sold its memory-chip operation to Micron in 1998, reported an increased loss in its first fiscal quarter, which ended on Nov. 28.

The world's second-largest memory chipmaker found itself US$315.9 million in the red from US$265.9 million a year earlier.

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