Tue, Dec 21, 2004 - Page 11 News List

Macronix axes earnings forecast

DOWNTREND The leading Taiwanese maker of flash memory chips says that falling prices, due to overcapacity and stagnant demand, have driven down its bottom line

By Lisa Wang  /  STAFF REPORTER

Macronix International Co (旺宏), a leading Taiwanese maker of flash memory chips used mostly in mobile handsets, yesterday axed its earnings forecast for this year, blaming a sharper-than-expected drop in the price of memory chips.

"Price declines will exceed our previous expectation in the current quarter. Prices may drop further to below our costs. This is the primary factor driving down the bottom line," Macronix financial executive Jonathan Lee (李俊賢) said in a telephone interview with the Taipei Times.

Lee said the price of flash memory is expected to fall by 20 percent in the quarter to this month, faster than a 10 percent decline Macronix projected in late October, due to overcapacity and stagnant demand.

That will bring down Macro-nix's gross margin to around 19 percent in the final quarter of the year, from 23 percent during the July to September period, he said.

Consequently, pre-tax profits for this year will plunge to NT$150 million, down 86 percent from NT$1.11 billion estimated in April, Macronix said in a statement submitted to the Taiwan Stock Exchange Corp yesterday. Earnings per share will decline to NT$0.03 from the NT$0.23 forecast previously.

Revenue will also drop by around 14 percent to NT$22.77 billion from NT$26.44 billion for this year, the statement said.

That means the memory chipmaker will swing to a loss of around NT$870 million in the final quarter as the company earned NT$1.02 billion, or NT$0.214 per share, in the first three quarters. Revenue rose to NT$17.99 billion during the first nine months.

"But, the result is much better than I thought. We would have expected Macronix to swing to the loss for the full year of 2004 as the price decline for flash memory chips accelerated in the past quarters," said Fu Hsu-cheng (傅旭正), a semiconductor analyst with Ta Chong Investment Trust Corp (大眾投信).

"The worse part is that nothing points to an end to that downtrend yet," Fu said.

Macronix is competing with Intel Corp and Samsung Electronics Co, the world's biggest chipmakers, in the flash memory business. In contrast to Macronix's complaint about oversupply-driven price collapse, Samsung Electronics said yesterday that it would invest 680 billion won (US$647 million) to expand capacity at its flash memory plant.

The South Korean chipmaker said expansion of the plant would be completed by the third quarter of next year.

Aside from the price erosion, Macronix, like many Taiwanese electronics manufacturers, attributed foreign-currency losses partly to the quarterly loss due to the weakening US dollar against the world's major currencies, according to the financial official.

Lee declined to reveal the amount of the foreign exchange loss.

Macronix shares fell NT$0.2, or 2.44 percent, to NT$8 on the Taiwan Stock Exchange yesterday.

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