Ratings agency Moody’s yesterday gave a negative outlook for the Asia-Pacific technology and semiconductor sectors over the next 12 to 18 months as companies’ profit margins come under pressure amid a global glut and economic slowdown.
“This outlook reflects mainly the pressures apparent on profitability due to the severer-than-normal downturn in prices for dynamic random access memory [DRAM] and NAND flash memory,” Moody’s senior analyst Ken Chan (陳冠中) wrote in a report released yesterday.
Moody’s did not foresee any meaningful recovery until well into next year in the face of persistent oversupply and pricing weakness, another Moody’s analyst, Wonnie Chu (朱惠萍), said in the report.
“A crucial problem is oversupply,” Chu wrote, adding that to gain a bigger slice of market share, DRAM maker Samsung Electronics Co and liquid-crystal-display maker LG Electronics Inc are continuing to expand capacity.
DRAM prices, which have been on a slump for the past 18 months, plunged to record lows in the middle of this year, dropping more than 90 percent from early last year and falling below manufacturers’ cost of production after years of overcapacity, the report said.
Prices may dip further this month and next month as inventory rises on dwindling demand, dashing hopes that computer memory chips might have a chance to end quarters-long losses by the year-end, Taipei-based researcher DRAMeXchange Technology Corp (集邦科技) said on Tuesday.
Powerchip Semiconductor Corp (力晶半導體), the nation’s largest DRAM supplier, said yesterday it planned to allocate more capacity to make non-DRAM chips in the next quarter to minimize the adverse impact from the DRAM oversupply.
Hsinchu-based Powerchip posted NT$5.04 billion in sales last month, down 24 percent from a year ago. The figure is the lowest since March.
Moody’s said in the report that it was especially concerned about profitability for contract chipmakers and chip testers and packagers in the region, although companies in these fields have held up better than the semiconductor industry as a whole.
Overall, the semiconductor sector “is being undermined by lower average selling prices, foreign exchange volatility and higher costs for raw materials and utilities,” Chan wrote.
Liquidity is another factor behind Moody’s negative outlook, with the liquidity profiles of the eight technology and semiconductor companies it covers varying. Three of the eight firms had weak liquidity, including South Korea’s Hynix Semiconductor Inc, the report said.
“In addition, the macroeconomic outlook is hardly supportive,” Chu wrote.
“The Asian technology and semiconductor sectors have still not yet felt the full impact of the economic slowdown in the US, Europe and Japan because so far the weakness in the Korean won has — for some — bolstered trade,” Chu wrote.
Market researcher Gartner Inc, however, believes that demand from emerging markets such as India and China will continue to support the Asia-Pacific semiconductor sector this year.
Gartner forecast on Monday that semiconductor revenues in the region would grow 6.4 percent to almost US$160 billion this year, compared with US$150 billion last year.
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