Mosel sales push down memory-chip prices

Prices of the most widely used memory chips had their steepest fall since Feb. 14 amid reports from traders that Mosel Vitelic Inc (茂矽電子) is dumping chips on the spot market to shore up its financial position.

The spot price of a benchmark so-called 256 megabit double-data rate chip fell 4.7 percent yesterday to US$3.05 from US$3.20 the previous day, according to Dramexchange.com, an online market based in Taiwan.

Mosel, which has NT$4.7 billion (US$135 million) of bonds maturing today, has increased sales of untested memory chips on the spot market since the second week of April, Dramexchange said.

The company, which controls Taiwan's second-largest chipmaker ProMOS Technologies Inc (茂德科技), has been selling the chips for as little as US$2.30, the market-watcher said.

Shares of Mosel fell by the 7 percent daily limit to NT$2.79 in Taipei, their lowest since the stock started trading in September 1995. The stock has dropped 39 percent since April 16.

The company said on April 18 it would negotiate new payment terms on the debt maturing today.

"This is the most concerning issue today," said Jack Kuo, a deputy manager in Mosel's finance department. "Our chairman will find some solution. We are still working on it." Kuo declined to provide details.

Mosel plans a formal meeting with bondholders on April 28, according to Frank Kuo (郭恭克), who counts the company's bonds among the equivalent of US$3.3 billion in corporate debt he helps manage for Fubon Securities Investment Trust Co (富邦投信).

Mosel has pledged shares in ProMOS as collateral, which should be sufficient as repayment, Kuo said.

The company won "support" from main bondholders for its plan to pay part of the debt with cash and the balance via installments, Mosel said in a statement earlier this month without giving more specific details.

Mosel this year took over ProMOS, a computer memory-chip venture with Germany's Infineon Technologies AG, the world's fourth-largest memory-chip maker. Mosel started selling ProMOS's output this year after Infineon scrapped purchase and technology pacts with ProMOS. Mosel owned 35 percent of ProMOS as of January.

Infineon owns about 25 percent of the company.

The only memory-chip makers to post profits last year were South Korea's Samsung Electronics Co, the largest supplier and Taiwan's Nanya Technology Corp (南亞科技).

Nanya last month turned to a first-quarter loss and said it expects the number of suppliers in the US$16 billion computer-memory chip industry to fall by half in four years to about five as high investment costs drive out all but the biggest competitors.

Infineon said it ended agreements with ProMOS in part because Mosel was using its stake in the venture as collateral for debt.

Standard & Poor's withdrew its rating on Mosel's long-term debt. In November, S&P downgraded Mosel's rating to CCC+ from B-, both junk grade.