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Nanya Tech's Q1 profits plunge

Nanya Technology Corp (南亞科技), the nation's second-biggest maker of computer memory chips, yesterday reported a 50-percent sequential plunge in first-quarter net profits as oversupply drove down prices, ending an almost one-year hike.

However, the Taoyuan-based chipmaker said prices could rebound mildly late this quarter because of falling inventory and growing demand for computers as Microsoft Corp's new Vista operating system starts having an impact.

Nanya Technology's net income fell to NT$3.26 billion (US$9.84 million), or NT$0.83 per share in the first quarter, compared with a revised figure of NT$6.46 billion, or NT$1.7 a share, in the fourth quarter of last year.

On an annual basis, the results represented about 60 percent growth from NT$2.04 billion, or NT$0.55 a share, in 2005. Revenues rose 15 percent year-on-year, but were down 23 percent quarter-on-quarter, to NT$17.12 billion.

"Oversupply was severe in the first quarter as customers needed to digest inventory after Vista's launch failed to stimulate demand as expected," said Pai Pei-lin (白培霖), a vice president at Nanya Technology.

During the quarter ended March 31, Nanya Technology's average selling price fell 26 percent quarter on quarter, Pai said.

"Prices are likely to bottom out in April or May. The decline is easing this month and customers are booking more [orders]," Pai said.

A price hike is likely in June as more PC vendors such as Acer Inc are planning to launch new Vista computers, which require higher-density memory chips, in the second half of the year, Pai said.

Morgan Stanley semiconductor analyst Frank Wang (王安亞), however, suggested that investors "avoid Nanya Technology, as it is losing money on its 8-inch [200mm] fab while all its profits today rely on Inotera Memories Inc (華亞科技)."

Wang expected the company to post a small loss this quarter.

Nanya Technology operates two eight-inch plants and is building its first advanced 12-inch plant. Some 60 percent of its output comes from Inotera, a joint venture with Germany's Infineon Technologies AG.

Wang gave an "equal-weight" rating to Nanya Technology, while giving an "overweight" rating to Inotera and Powerchip Semiconductor Corp (力晶半導體), the nation's biggest memory chipmaker.

Inotera yesterday said its first-quarter net income dropped 21 percent quarter-on-quarter to NT$3.88 billion, or NT$1.25 per share, because of price erosion. On a year-on-year basis, profits were up 45 percent.

Inotera also raised its annual output growth forecast to more than 80 percent, from 70 percent, Inotera president Charles Kau (高啟全) said.

Kau said the company planned to expand its estimated capital spending this year -- originally tagged at NT$40 billion -- by another NT$6 billion or NT$12 billion, to upgrade its process technology from 90 nanometer to 70nm or 75nm in one or two phases.
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