Powerchip's first-quarter earnings fall

Powerchip Semiconductor Corp (力晶半導體), the nation's biggest memory chipmaker, yesterday blamed a price slump as it reported its lowest quarterly earnings in the past four quarters and said that the second quarter would be even worse.

"Prices plunged at a faster pace than we expected in the first quarter, primarily due to sagging demand as a shortage of Intel Inc's chipsets slowed computer [shipments]," chairman Frank Huang (黃崇仁) told investors yesterday.

Memory prices fall

The price of dynamic random access memory (DRAM) chips fell over 25 percent in the first quarter to below US$3 per unit, the level Huang previously predicted for the current quarter.

During the first three months of the year, Powerchip's earnings fell 33 percent to NT$2.17 billion, from NT$3.23 billion a year ago. Earnings per share slid to NT$0.52 per share on revenue of NT$12.76 billion.

"We believe the second quarter should be the bottom rather than the third quarter, as in previous times. April should be the worst in terms of price," Huang said.

Huang expects a recovery to occur in the third quarter, from rising demand for new memory chips when a technology transition -- from the current DDRI memory chips to higher density DDRII chips -- takes hold in the second half.

Before that, chip prices should remain between US$2.3 and US$2.5 per unit in the second quarter as the computer industry enters a slow season, Huang said.

The spot price for the mainstream 256 megabit DRAM chips has plunged over 40 percent since the beginning of the year, hitting US$2.38 per unit yesterday, according to the Taipei-based online price setter DRAMeXchange.

Second-quarter risk

"Further price drops could put Powerchip at risk of swinging to losses in the second quarter [which would be the first loss in seven quarters]," said Frank Wang (王安亞), a DRAM industry analyst with Morgan Stanley in Taipei.

Wang said chip prices remain under heavy pressure.

In an earlier report, Wang projected Powerchip would be able to eke out profits of NT$0.25 a share for the second quarter. The cautious view came after Powerchip's first-quarter result fell short of his expectations.

He has predicted the chipmaker will make NT$0.72 a share.

Weak demand

Paul Tsai (蔡昀達), a fund manager who helps oversee a NT$500 million fund for International Investment Trust Co Ltd (國際投信), also expressed a cautious view on the highly volatile memory chip industry.

"We haven't seen any clear signs indicating the industry is approaching bottom. Demand remains weak now," Tsai said after the investor's conference.

Taiwanese memory chipmakers such as Powerchip, Nanya Technology Corp (南亞科技) and ProMOS Technologies Inc (茂德科技) will struggle to keep their heads above water in the second quarter, Tsai said.

Shares of Powerchip have slid about 8 percent since the beginning of the year.

The company's shares closed at NT$23.95 yesterday on the nation's over-the-counter market, the Gretai Securities Market.