Powerchip Semiconductor Corp (力晶半導體), the nation's biggest computer memory chipmaker, reported its first quarterly loss in four years, as chip prices more than halved on a supply glut.
In the second quarter, net losses were NT$3.8 billion (US$116 million), or NT$0.56 per share, compared to net profits of NT$3.19 billion, or NT$0.58 per share, a year earlier. Net income in the first six months of the year was NT$3.69 billion, or NT$0.54 per share, down 12 percent year-on-year.
Powerchip predicted a quick turnaround next quarter on belated demand for Microsoft Corp's new Vista operating system.
"The third quarter will be a promising period in terms of the supply-demand situation," president Brian Hsieh (謝再居) told reporters yesterday, joining in the optimism already expressed by rival Nanya Technology Corp (南亞科技).
Hsieh recently said he felt PC makers and PC buyers were more willing to upgrade their computers to Vista and to expand their memory space to 2 gigabytes after DRAM prices have plunged over 50 percent to affordable levels.
Coupled with the limited growth in DRAM output, the chip price may jump nearly 40 percent to US$2.50 per unit in the third quarter from US$1.80 in the previous quarter, Hsieh said.
"As long as the price holds steady above US$2 [in the current quarter], the possibility of making profits will be high," Hsieh said.
Powerchip said it would manufacture 10 percent more DRAM chips next quarter by shrinking the circuit width to 70 nanometers. Nanya Technology also expects a 10 percent output expansion.
Powerchip also expects to increase its capital spending to NT$71 billion, up from the previous estimate of NT$57 billion.
"We expect Powerchip to eke out a profit in the third quarter because of stronger cost efficiency," said Kenneth Lee (李克揚), a semiconductor analyst with Taipei-based broker Primasia Securities.
Powerchip would be able to reduce costs faster than competitors, benefiting from its partnership with Japan's Elpida Memories Inc, which developed and transferred more competitive 70-nanometer technology to the Taiwanese firm, Lee said.
In addition to improving fundamentals, Powerchip has a lower price-to-book ratio at 1.2 than Nanya's 1.6, meaning the stock looks cheap, he said.
Powerchip said earlier this month that revenues had leapt 37 percent to NT$46.17 billion from the same period last year.
The firm said yesterday it planned to build a new plant to make flash memory chips -- mostly used in consumer electronics products -- later this year at the earliest.
Flash memory chips currently account for less than 5 percent of Powerchip's total revenues and the company does not expect the contribution from the business to increase until the third quarter of next year.
Powerchip shares were up 0.92 percent to NT$22.05 yesterday, better than the benchmark TAIEX's 0.37 percent gain. Nanya Technology shares fell 2.03 percent to NT$28.9.