Thu, Jul 24, 2008 page12

• Nanya outlines plan for recovery

  IMPROVEMENT Coupled with the closure of a factory, the chip maker said that the production rate could be 50 percent for this year, lower than the 65 percent forecast

  • By Lisa Wang / STAFF REPORTER, IN TAOYUAN
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  Nanya Technology Corp (南亞科技), the nation's second-largest maker of memory chips used in computers, said yesterday quarterly losses had shrunk significantly over a price rebound, adding it would trim capital spending this year to help accelerate recovery from the industry’s severe, glut-driven slump.

  Taoyuan-based Nanya posted its fifth consecutive quarterly losses at NT$7.3 billion (US$240 million) for the quarter ending on June 30, contracting 17 percent from NT$8.78 billion in the first quarter, a company statement said. The chipmaker posted losses of NT$2.83 billion a year ago.

  “The improvement is mostly because of better chip prices,” said Pai Pei-lin (白培霖), a vice president at Nanya.

  Contract prices for dynamic random access memory (DRAM) chips rose at a 20 percent quarterly pace in the April to last month period, Pai said.

  Looking forward, Pai said net losses should narrow next quarter on the back of stabilizing DRAM prices, but the recovery may not be strong enough to bring Nanya back to profit any time soon.

  “After a fast price rebound in the second quarter, we are feeling pressure from customers to further increase DRAM prices in August,” Pai said.

  Demand is softening as rising inflation around the globe could significantly weaken consumers’ willingness to buy PCs and consumer electronics in the second half of the year, Pai said.

  This was already reflected in the slower-than-expected demand during the back-to-school shopping season, he said.

  Despite the narrowing losses, Rick Hsu (徐稦成), a senior research analyst at Nomura Securities Co’s Taipei branch, said: “we are still bearish about DRAM companies. The trough is not over yet as demand is still sluggish.”

  “We don’t even know whether any DRAM companies will return to profit in the last quarter,” Hsu said.

  Three months ago, some DRAM companies had expected the more than one-year-long series of quarterly losses would end in the next quarter, he said.

  Partly because of slowing demand, Nanya intends to cut by 33 percent its capital spending this year, from NT$30 billion to NT$20 billion, Pai said.

  “We plan to slow down our capacity expansion at FAB 3 [Nanya’s first 12-inch plant],” Pai said.

  Coupled with the closure of an old factory, Nanya said the production growth rate should be 50 percent annually for this year, lower than the initial 65 percent estimate.

  Inotera Memories Inc (華亞科技), a memory joint venture between Nanya and Germany’s Qimonda AG, posted net losses at NT$3.27 billion yesterday for the second quarter from losses of NT$4.18 billion in the first quarter, a company statement said.

  Inotera had reported NT$273 million in earnings in the second quarter of last year.

  Inotera would also cut capital spending for the second time this year to NT$23 billion, down 23 percent from NT$30 billion.

  As a result of a better-than-expected technology upgrade and improving operation efficiency, however, Inotera’s output this year would grow by more than 60 percent from last year, faster than the initial plan for a 50 percent increase, company president Charles Kau (高啟全) said.

  “That means a significant cost reduction,” Kau said. Fixed cost will be 30 percent lower, he said.
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