Macronix has record loss last year

Macronix International Co (旺宏電子) yesterday reported record losses of NT$11.36 billion for last year, with company executives warning the losses would continue until at least the end of this quarter.

In a Bloomberg report, Chief Executive Officer Miin Wu (吳敏求) said that earnings this quarter would be worse than last quarter, when it reported a loss of over NT$2 billion.

Analysts said that it is unlikely the company can turn a profit before the end of the year.

"Macronix will see no significant recovery until the second half of 2003, but at this rate it can't even break even by the end of the year," said George Wu (吳裕良), an analyst at Primasia Securities Co.

While not returning to profitability this year, Macronix should at least reduce its loss by year-end.

"I forecast a loss of NT$3 billion for Macronix in 2003," said Alfred Ying (應宗傑), an analyst at BNP Paribas in Taipei.

Ying expects orders to pick up in the second half.

Macronix makes chips for Nintendo Co's GameCube gaming console, and also produces flash-memory chips for Mitsubishi Electric Corp.

Flash memory is used in mobile phones and personal-digital assistants and can store data after a device is switched off.

Both analysts were shocked by the scale of last year's losses, saying that a loss of more than NT$11 billion was primarily because of a huge drop in chip prices. Memory-chip prices declined by 40 percent last year, Ying said.

Although Macronix increased sales over the year, it could not make up for the drop in prices.

"Output is up, but revenue is down by 25 percent," Wu said.

Macronix also suffered from slow sales of consumer products in the final three months of the year. Nintendo reduced orders because of lackluster sales of its GameCube video console, and Hewlett-Packard Co reduced its multimedia-chip orders, Wu said.

Macronix has made changes in an attempt to turn its fortunes around.

"The company is undergoing a restructuring process, which shows they have a strong desire to return to profit this year," Wu said.

Macronix is also offering new products, making a break from its traditional base of low-capacity memory products. By teaming up with Japan's Mitsubishi Electric, Macronix has gained the technology to make higher capacity flash-memory chips. Last year, 34 percent of the company's sales went to Mitsubishi, which increased flash-memory-chip orders for use in its cellphones.

Macronix is now trying to charm investors. CEO Wu was wooing analysts over lunch yesterday, explaining his new vision for the company and its new products that will be offered this year. Few are impressed.

"The company told us they would break even in October, November and December, but in fact they had a much more severe loss than the previous quarter," said Primasia's Wu. "It is hard to believe them now."

The outlook remains gloomy. For the next three months, Macronix expects to use only 57 percent of its production capacity, the same level as last quarter. In the third quarter of last year, 65 percent of the company's factory capacity was in use.

"Macronix relies on consumer products, so a weaker demand for consumer products hits the company hard," Ying said.

There is very little chance of a turnaround in the first half as this is a slow time for consumer product sales after the holiday season, he added.