ProMOS expects NT$973 million profit

ProMOS Technologies Inc (茂德科技), Taiwan's second-largest memory chipmaker, said it expects to achieve NT$973 million in pretax profits in the fourth quarter as the company's cost-reduction effort bears fruit and prices for memory chips start to rebound.

The company's upbeat outlook came after its announcement last week that it was dumping its pretax loss forecast of NT$1.19 billion for the year in favor of a pretax profit of NT$361 million.

"There is a chance that chip prices will inch up in the fourth quarter. And the price should remain at a high level in the first quarter of next year," ProMOS spokesman Albert Lin (林育中) told investors yesterday.

Prices of the benchmark 256-megabit, 266-megahertz double-data-rate dynamic random-access memory (DRAM) chip are currently holding steady at US$4.20. But beginning in the second quarter of next year, the price is expected to remain between US$3 and US$4, in which range ProMOS will still be able to make a profit, Lin said.

Lin's comment on the price trend echoed the international research company iSupply Corp's latest report issued earlier this week. The overall DRAM prices are expected to decline 15 to 20 percent next year, below the average historical rate of 35 percent and below the 26 percent posted this year as no major technological advancements are likely to take place in DRAM manufacturing next year, iSupply said.

"This year is not the best year. Industry sentiment in 2004 will be better than that of this year," Lin said.

The Taiwanese chipmaker said its sales in October reached NT$2.75 billion from NT$2.65 billion in September, Lin said. The October pretax profits will be around NT$400 million to NT$500 million, he added.

"The performance of local DRAM chipmakers looks good recently. We're optimistic about the industry for the short term as concerns of oversupply are offset by slower-than-expected increases in capacity," said Leon Chen (陳正宭), an analyst with Hua Nan Securities Investment Management Co (華南永昌證券).

Chen, however, said ProMOS is less competitive as it has lagged behind its local rivals Powerchip Semiconductor Corp (力晶半導體) and Nanya Technology Corp (南亞科技) in building a new advanced 12-inch fab.

ProMOS hopes to have its second 12-inch fab begin construction in the first quarter of next year in Central Taiwan Science-based Industrial Park (中部科學園區). The fab is expected to complete construction in 2006, with a monthly capacity of around 40,000 wafers per month, according to Lin.

Powerchip is building a second 12-inch wafer plant with a projected capacity of 40,000 wafers per month. The company is expected to start operation in the first quarter of 2005 at the earliest, spokesman Eric Tang (譚仲民) told the Taipei Times.

ProMOS plans to issue global depositary receipts (GDR), which will be equal to 600 million common shares, in the first quarter of next year, to fund the construction of the plant along with bank loans.

Jones Wang (王源錦), deputy manager of ABN AMRO Asset Management (荷銀投信), was not excited about ProMOS's good news, saying that the DRAM sector will remain gloomy as chip prices are likely to tumble after seasonal demand wanes.

"I haven't seen a turning point for the DRAM sector as chipmakers are expected to suffer from a cutthroat price war," Wang said.

ProMOS shares fell by NT$0.2 to close at NT$14.6 on the TAIEX yesterday, while Nanya and Powerchip shares rose by NT$0.2 and NT$0.1, respectively, to end at NT$22.0 and NT$17.30.