Thu, Nov 18, 2004 - Page 11 News List

Chip prices slip on lower demand


Stock prices of Taiwan's computer memory chipmakers led by Powerchip Semiconductor Corp (力晶半導體) rallied for the third straight session yesterday, despite the continuing drop in memory chip prices as a result of dwindling demand.

The strong performance after recent weakness was due largely to a boost by Japanese chipmaker Elpida Memory Inc's strong trading debut on Monday, analysts said.

Prices for mainstream 256 DDR dynamic random access memory (DRAM) chips are expected to slip further to between US$4.2 and US$4.6 per unit in the upcoming week, according to the latest report released by market researcher DRAMeXchange yesterday.

"I believe the major driver should be Elpida's initial offering. Shares of local dynamic random access memory chipmakers have gained significantly since the debut," said Wang Bou-li (王博立), a semiconductor analyst with SinoPac Securities Corp (建華證券).

Powerchip, a partner of Elpida, reported the biggest gain among its local rivals. Powerchip shares have climbed 6 percent since Monday to close at NT$24.4 yesterday on the nation's over-the-counter market, the Gretai Securities Market.

By contrast, Elpida fell 0.26 percent to 3,890 yen on Tokyo yesterday.

"Powerchip share prices are relatively cheap compared with those of Elpida and Micron Technology Inc of the US," Wang said.

Powerchip has kept its price-earnings ratio at about 4 times the company's earnings per share estimate of 6, which is much lower than around 30 times that of Micron, he said.

The Taiwan's top DRAM supplier said on Monday that it plans to invest about NT$200 billion to build four 12-inch DRAM plants.

The rally among DRAM shares was also due to Morgan Stanley Capital International's official announcement yesterday to hike Taiwan's weighting, which has attracted capital back to electronics shares, Wang said.

The strength, however, was very limited compared to the boost from Elpida as foundry companies such as Taiwan Semiconductor Manufacturing Co (台積電) and financial stocks are overseas fund managers' favorite, not DRAM shares, he added.

An analyst at Yuanta Core Pacific Securities (元大京華證券), who requested not to be named, however, warned that Taiwan's DRAM shares may not be as cheap as most people expected due to different accounting practices in Taiwan and in the US.

"Powerchip could lose the advantage of a low price-earnings ratio, if it deducts stock bonus for employees from earnings," he said.

As share prices of the highly cyclical DRAM sector will ultimately go down, the ongoing down trend of DRAM prices is expected to be in place for another two quarters.

"The time is not right to buy DRAM stocks now as most stocks are approaching the target prices I set," Wang said.

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