Powerchip Semiconductor Corp (
Looking ahead, despite an expected downtrend in chip prices, Powerchip chairman Frank Huang (
But, turning more conservative than three months ago, Huang said prices for memory chips may slide to US$3.2, or US$3.3 per unit on the spot market this year.
He also expected a price correction on servers in the next quarter during the annual seasonal slowdown. Chip prices were likely to tumble by about a quarter to hit a historical low of US$3 a unit, he said.
But strong cost control puts Powerchip in a better position to outstrip its rivals, Huang said.
"We have the strongest cost-saving abilities in the DRAM [dynamic random access memory] industry," he said, adding that limited new production will also help bolster chip prices.
Powerchip will be able to save another 10 to 15 percent after it switches more production to advanced 0.11-micron technology, moving its cost to below the current US$2 per unit, Huang said.
But a 7 percent decline in chip prices helped to shave a similar amount off of Powerchip's gross margin last quarter -- which fell to 42 percent, from 49 percent in the third quarter -- as did a 6 percent appreciation of the local currency versus the greenback.
During the three-month period to last month, Powerchip's earning's more than tripled to NT$5.8 billion, or NT$1.41 per share, compared to NT$1.8 billion a year earlier. Sales also surged 92 percent to NT$16.5 billion.
That brought the memory chipmaker's earnings for last year to NT$21.4 billion, or NT$5.63 a share, a big jump from NT$168.98 million, or NT$0.06, in 2003. Sales also soared to NT$57.44 billion, from NT$22.97 billion.
Despite the apparently brisk growth, Robert Lin (
"Chip prices were lower than I calculated," Lin said.
He expects sagging demand in the upcoming slow season to drive chip prices down to around US$3 per unit. But for this year, Lin said the speed of the transition from DDRI memory chips, which are used in most computers now, to faster DDRII chips, would be one of the most important factors affecting chip prices.
Powerchip expects DDRII memory chips to overtake DDRI as its mainstay product in the second half of this year and says it is ready for the technological transition.
Powerchip plans to spend NT$39 billion on new facilities this year, up from NT$29 billion last year, with a big portion of that amount going to the company's second advanced 300mm plant.
The new factory will help boost Powerchip's production by 60 percent this year compared to last year, according to Huang. The plant is scheduled to start mass production in the third quarter.