Powerchip shares jump on report of new business influx

Powerchip Semiconductor Corp's (力晶半導體) shares jumped by more than 3 percent yesterday on speculation that the Taiwanese firm would extend its partnership with Renesas Technology Corp by supplying high-volume chips to the Japanese chipmaker.

Powerchip, Taiwan's biggest maker of dynamic random access memory (DRAM) chips used in computers, now supplies 1Gb flash memory chips to Renesas in exchange for technological support.

Renesas, the world's No.4 NAND flash memory chipmaker, may further farm out production of high-volume products such as 4Gb NAND flash memory chips to Powerchip in the wake of its exit from the market amid stiff competition, a Chinese-language newspaper reported yesterday.

"We have not heard this information from our partner," Powerchip spokesman Eric Tan (譚仲民) told the Taipei Times in a phone interview.

NAND flash memory chips are used in a wide range of consumer electronics including Apple Computer Inc's popular digital music player iPod series.

Tan said his company now makes over 5,000 NAND flash memory chips a month at a 300mm plant in Hsinchu, and it plans to double monthly production to 10,000 chips in accordance with market demand.

Shares of Powerchip climbed 3.15 percent to NT$19.6 yesterday on the Taiwan Stock Exchange, compared to a 1.92 percent increase of the benchmark TAIEX.

"Potential orders from Renesas gave a boost to the stock," said Henry Miao (苗台生), an equities analyst with Hua Nan Securities Investment Management Co (華南永昌投顧).

Rick Hsu (徐稦成), a semiconductor analyst with Nomura Securities Co Ltd in Taipei, held a neutral stance on the seemingly bullish news but retained his "buy" rating on Powerchip.

"Powerchip is unlikely to compete with Samsung Electronics on cost effectiveness," Hsu said.

Powerchip is doing pilot runs of 4Gb flash memory chips on 90 nanometer technology at its 300mm fab and is scheduled to start mass production in the first quarter of next year, he said.

Meanwhile, bigger rival Samsung Electronics Co is making such chips using the more advanced 70 nanometer technology, and plans to migrate to more advanced 55 nanometer technology next year, he added.

Powerchip's NAND flash memory business makes up just 5 percent of its total sales at present, Hsu said.

Powerchip said yesterday that sales fell to NT$4.91 billion (US$146.6 million) last month, down 9.3 percent from NT$5.41 billion a year ago, owing to sagging DRAM prices. It blamed price drops for the decrease.

Powerchip said in a statement that DRAM prices fell by more than 10 percent last month from October.