Soaring DRAM chip prices help boost Gretai shares

Taiwanese computer memory-chip shares soared yesterday, led by the industry leader Nanya Technology Corp (南亞科技), in the wake of a pickup in chip prices from a two-week slump.

Nanya shares climbed nearly 7 percent, the intraday limit, to NT$24.7 each on the TAIEX, outstripping the benchmark index's rise of 1.73 percent to 6,137.26 points yesterday.

George Wu (吳裕良), a semiconductor specialist with Primasia Securities in Taipei, said the much-anticipated rebound in spot prices was the main driving force.

The spot price of standard double-data-rate (DDR)/256Mb/400MHz dynamic random access memory (DRAM) chips reached US$4.89 each, up 1.03 percent from Thursday, according to the Taipei-based online price fixer DRAMeXchange's tally.

The rebound ended a 13-day decline, shedding 11 percent from US$5.36 on May 11, DRAMeXchange said.

"We think the spot prices already hit bottom," said Eric Tang (譚仲民), a spokesman of Powerchip Semiconductor Corp (力晶半導體), the nation's No.2 memory chipmaker.

"There's a high possibility of an uptick in the spot market," he said.

Shares of Powerchip, which sells a big chunk of its memory chips to the spot market, added 4.81 percent to NT$30.5 on the Gretai Securities Market (櫃檯買賣中心), the over-the-counter market.

To ease investors' concerns about possible profit erosion due to the weak spot prices, Tang said Powerchip will be able to sustain gross margin this month of around 45 percent.

In addition, sales for this month will also remain at a record-high of about NT$4.54 billion, which the company hit last month, he added.

In addition to the steady spot chip prices, Wu said DRAM shares also rose on market speculation that DRAM makers may secure orders from international computer vendors who are scheduled to visit the Computex trade show next week in Taipei.

But Tang dismissed such expectations, saying that potential clients are already in contact with Powerchip in preparation for the peak season, the fourth quarter in particular.

"Computex is not a special occasion for an increase in orders," he said.

Smaller rival ProMOS Technologies Inc (茂德科技), which supplies memory chips to Dell Inc, shares that view.

"The current supply is so tight that we are unlikely to see inventory buildup at the moment," PROMOS spokesman Albert Lin (林育中) said.

ProMOS shares surge 6.08 percent to NT$19.2 on the Gretai Securities Market.

With 34-percent sales from the volatile DRAM spot market, ProMOS said it doesn't expect the price decline in the past two weeks to hurt ProMOS's sales and earnings for this month, Lin said.

"The earnings for May will largely remain flat as in April, but I think we still have a chance to see a mild increase,"Lin said.

ProMOS posted earnings of NT$1.3 billion last month.

Lin told investors yesterday that spot prices will fluctuate in a narrow range between US$4.50 and US$5.

"I think that's the worst-case situation. Prices are unlikely to dip further because of strong demand from computer vendors," he said.

Lin said prices are likely to hold steady through the end of next year as there are no clear signs showing a spike in chip supply to hurt prices.