Powerchip seeks loan for equipment

Powerchip Semiconductor Corp (力晶半導體), Taiwan's biggest memory-chip maker, is asking lenders for a NT$30 billion loan (US$926 million), bankers asked to bid said.

The money will be used to help pay for NT$60 billion in equipment for a plant that it bought from Macronix International Co (旺宏電子), which makes chips for electronic game consoles, said bankers, who declined to be identified.

Powerchip will pay NT$5.3 billion for the factory, which it expects to eventually produce 35,000 chips per month using advanced process technology on 300mm wafers, the company's president Brian Hsieh (謝再居) said on Jan. 18.

"The purchase will solve the urgent need for capacity expansion. We are facing mounting pressure to meet [customer] demand," Hsieh said at the time.

To complete the Macronix plant, Powerchip will more than double capital spending for this year to more than NT$60 billion from the NT$30 billion estimated previously. Last year, Powerchip spent roughly NT$50 billion on new equipment.

"Powerchip is expanding to bring down its costs so that it is able to sell products at a cheaper rate to get a bigger slice of the market," James Huang (黃建銘), an analyst covering semiconductor companies in Taiwan for Sinopac Securities Corp (建華證券), said in an interview yesterday.

``The company has been able to bring down its production cost by about 20 percent each year,'' he said.

Powerchip shares rose NT$0.35, or 1.64 percent, to NT$21.7 yesterday on the nation's over-the-counter Gretai Securities Market, in line with a similar rise on the benchmark TAIEX.

Global chip sales are forecast to grow at 8.2 percent this year, according to estimates released by California-based research company VLSI Research Inc. Industry sales will rise to US$208 billion this year, compared with US$192.2 billion last year, the research company said in a statement on Jan. 6.

Powerchip has been spending US$700 million to US$1 billion a year to achieve economies of scale, according to Huang.

Lenders were asked to bid in the next two weeks. The tenure of the loan will be about five years, the banker said.

Other possible funding options for the remaining equipment cost include cash, bonds and depository receipts, the bankers said.

Powerchip last tapped the market with a NT$15 billion five-year loan in October last year, which paid an interest margin of 80 basis points, or 0.8 percentage points, over the rate for 90-day commercial paper, an unsecured short-term promise to repay principal on a specific future date.

The company is targeting revenue of NT$100 billion this year compared with NT$51.6 billion last year, Hsieh said on Jan. 25.

additional reporting by Lisa Wang