Powerchip Semiconductor Corp (力晶半導體), the nation’s top maker of memory chips used in computers, yesterday posted record quarterly losses as a deteriorating economy added pressure to the industry’s most severe slump on a glut after demand dwindled unexpectedly.
During the third quarter, the Hsinchu-based company’s quarterly net losses swelled to NT$15.02 billion (US$459.4 million), marking the sixth consecutive quarterly losses. The company reported a net loss of NT$1.9 billion a year ago and NT$7.27 billion in loss for the second quarter.
“After one-and-a-half years of digestion of excessive supply, I had thought supply would have matched demand in the second half. But the global financial crisis” changed all that, company chairman Frank Huang (黃崇仁) told investors.
CUT
Huang said a joint output cut among memory chipmakers could help the industry hit bottom in the current or next quarter.
To cope with bleak industry prospects, Powerchip said it would cut spending on new equipment by more than two-thirds next year to less than NT$10 billion, compared with NT$34.5 billion planned for this year, company president Brian Hsieh (謝再居) said.
Powerchip said it would also suspend construction of a new advanced plant, which was scheduled to begin production next year, he said.
“If you ask me when spring will come, I’ve got no answer. We are now in an ice age rather than in harsh winter as you were told [three months ago],” Hsieh said. “It is turning into a survival game.”
In the third quarter alone, the price of benchmark dynamic random access memory (DRAM) chips plunged about 38 percent to average at US$1.23 per unit after plunging 85 percent last year on severe glut, Taipei-based market researcher DRAMeXchange Technology Inc (集邦科技) said.
“Our efforts now are focusing on maintaining cash balance, which is crucial [to weathering the downturn], as well as more cost saving measures,” Hsieh told investors, who saw cash position as a crucial factor in surviving the downcycle in the DRAM industry.
The reduction in capital spending would bring down annual output growth to about 30 percent to 40 percent next year, compared to 65 percent expansion this year and 90 percent last year, Powerchip said.
“The plan to sharply cut capital spending along with more cost-saving efforts will assure investors that the company will not disappear,” said Kenneth Yang (楊克勤), a semiconductor analyst at Primasia Securities Co.
Regarding the third quarter, Powerchip has NT$17.6 billion in cash and tradable securities on hand.
STRATEGY
In the final quarter of this year, Powerchip also intends to cut another 10 percent to 15 percent in output by temporarily shutting down less cost-efficient plants and encouraging employees to go on leave.
Powerchip hopes to accomplish further output reduction, which could drive up chip prices, and to migrate more manufacturing to next-generation plants to give it an edge over its competitors.
Shares of Powerchip rose 0.42 percent to NT$4.77 yesterday, outperforming the benchmark TAIEX index, which was up 0.22 percent.
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