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Nanya expects loss as chip prices stay low

Nanya Technology Corp (南亞科技), the world's fifth-largest memory-chip maker, said it expects to post a second-quarter loss because memory-chip prices have yet to recover from a slide started in the fourth quarter last year.

"We don't think prices are good enough to break even in this quarter," Nanya vice president Charles Kau (高啟全) said in an interview.

Nanya president Lien Jih (連日昌) said on May 15 the company will post a second-quarter loss based on prices at that time. The spot price of the most widely used computer-memory chip has since risen by almost 9 percent to US$3.30, according to Taipei-based Dramexchange.com, the operator of an online marketplace.

"Prices aren't that exciting," said Vincent Lai, who counts shares in memory-chip makers among the equivalent of US$865 million in equities he helps manage at HSBC Asset Management Taiwan. "The suppliers still can't make profits."

The spot price of a benchmark 256-megabit double-data rate chip, used as the main memory in personal computers, climbed US$0.02 yesterday to US$3.30, according to Dramexchange.

Improving demand for personal computers should continue to help lift memory-chip prices, the company said.

"Pricing will be better in the second half," said George Wu (吳裕良), an analyst with Primasia Securities Co, who expects Nanya to make its first quarterly profit this year in the three months ending in December.

Nanya shares rose NT$1.20, or 5 percent, to NT$25.20 in Taipei. The shares have risen by more than a third from the three-month low of NT$18.80 the stock touched on May 21 and March 10.

"The rise in Nanya's share price has very much to do with expectations," said Wu, who forecasts Nanya will post a NT$1.2 billion loss in the second quarter. Contract prices will need to rise above US$5 per chip before Nanya can make a profit, Wu said.

Nanya yesterday said May sales jumped 38 percent from a year ago to NT$2.2 billion on stronger demand. Nanya has also cut inventory to two-weeks' supply from about 2 1/2 weeks on May 27 as demand improves, the company said.

The shares of ProMOS Technologies Inc (茂德科技), Taiwan's second-largest supplier, today rose NT$0.50, or by the 7 percent market limit, to NT$8. No. 3 Powerchip Semiconductor Corp (力晶半導體) also rose by the 7 percent limit to close at NT$10.85.

ProMOS trades at a multiple of about 16 times this year's expected earnings, which some investors said is attractive.

"Valuations of memory-chip makers are low," said HSBC's Lai. "The recent rally is because of low price-to-earnings ratios."

Nanya's Kau denied a local newspaper report that said the company may start making a profit this month after prices improved. It's still too early to say whether Nanya can make a profit in June, Kau added.
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