Nanya Technology Corp (
The price of memory chips plunged more than 50 percent last quarter from a year ago on abundant supply after computer memory chipmakers massively expanded capacity last year in the hope of making even better profits following a lucrative 2004.
On top of that, the Christmas demand for computers in the fourth quarter was not fulfilled until December due to a component shortage, Nanya Technology vice president Pai Pei-Lin (白培霖) told an investor's meeting yesterday.
"The demand will extend to the first quarter," Pai said. "The first quarter will be a better period than the final quarter of 2005," he said.
Nanya Technology posted NT$270 million (US$8.4 million) in un-audited net income for the fourth quarter. That represents a nearly 70 percent decline from the NT$867 million the company reported a year earlier.
During the same period, earnings per share also fell to NT$0.07 from NT$0.24.
"The result is terrible," said David Lin (
Nanya Technology's fourth-quarter earnings were a fifth of Lin's forecast of NT$1.5 billion. Lin said most analysts expect the chipmaker's net income to exceed NT$1 billion.
Pai explained that "prices have fallen much faster than we thought."
In the fourth quarter alone, the price dropped 15 percent, he said.
But the price will rise more than 10 percent in the current quarter, buoyed by increasing demand.
"Supply will be very tight in the current quarter, specifically for DDR2 [second-generation double data rate] memory chips," Pai said.
He said DDR2 chips made up around 40 percent of the company's total current output, and that the company plans to boost the percentage to over 60 percent next quarter.
In addition to the volatile industrial cycles, the company also blamed its heavy tax burden for eroding profits.
Nanya Technology paid NT$705 million in income tax for the fourth quarter, while posting pre-tax profits of NT$974 million.
The company said that was due to a decrease in its tax breaks and the government's new minimum tax mechanism.
The company, which now operates a 12-inch fab through Inotoera Memory Inc (華亞科技), a joint venture with Infineon Technologies AG, plans to build its own cost-saving 12-inch plant in the current quarter.
The new plant is scheduled to begin mass production by the end of next year with a maximum output of 60,000 units per month. As a result, the company plans to significantly boost capital expenditures to US$200 million this year.