Powerchip predicts good year for chips

Powerchip Semiconductor Corp (力晶半導體), Taiwan's third-largest memory-chip maker, expects this year's revenue to double compared to last year due to a sharp growth in chip output and cost saving efforts, a company official said yesterday.

Powerchip swung to profitability by eking out NT$169 million in after-tax earnings, or NT$0.06 a share, last year, thanks to effective cost savings as a result of the operation of its more efficient 12-inch wafer production plant or fab during the second half of last year, company spokesman Eric Tang (譚仲民) told reporters yesterday.

Powerchip said its revenues for last year rose to NT$22.9 billion from NT$12.7 billion in 2002.

Looking forward, Powerchip chairman Frank Huang (黃崇仁) said "we're very optimistic about the memory-chip industry this year as a widespread personal computer replacement, as a result of improved global economy, will spur the demand."

"Powerchip's 2004 output is expected to grow by at least one fold, compared to that of last year," Huang added.

Infineon Technologies AG, the world's sixth-largest semiconductor company, also said yesterday it is confident the industry is moving in the right direction. Price volatility is becoming less drastic as memory chips extend to communications and other devices from PCs, said Loh Kin Wah, who runs Infineon's Asia Pacific operations.

Experience has taught industry analysts to be more cautious, although they agreed local chipmakers will enjoy a profitable year.

"We did see chip demand, but it comes merely from retailer inventory build-up, not from end users," Wang Bou-li (王博立), who follows the dynamic random access memory (DRAM) chip industry at Polaris Securities Group (寶來證券).

Without solid demand, DRAM prices will remain weak in the first half of the year, Wang said. He predicted the DRAM spot price would fall to US$3.5 in the second quarter from US$3.84 in the fourth quarter of last year. Powerchip sells a big portion of its chips on the spot market.

"Despite the price decline, Powerchip will outperform its bigger local rivals including Nanya Technologies Corp (南亞科技) as it has diversified to foundry [making chips to order for third parties] and flash-memory chip businesses, which will help it reduce the impact of the price decline and improve its gross margin," Wang said.

Sharing a similar view with Wang, Liu Szu-liang (劉思良), a DRAM analyst at Yuanta Core Pacific Securities (元大京華), said "it'll be a better year for DRAM players this year, compared to 2003. But, I won't expect large-scale growth as it is still uncertain if the global economy will have a full recovery to stimulate large-scale PC renewal."

Powerchip shares soared by 6.1 percent to close at NT$20.7 each yesterday on the TAIEX yesterday.