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Nanya posts sixth consecutive loss

“But a 20 percent reduction [in production of computer memory chips] is still not big enough to solve the problem of oversupply.”

— Liu Szu-liang, Yuanta Securities analyst

Nanya Technology Corp (南亞科技), the nation’s second-largest supplier of computer memory chips, yesterday posted its sixth consecutive quarterly loss, which it attributed to the collapse of chip prices over an unresolved glut and sagging demand.

In the quarter ending Sept. 30, net losses widened to NT$8.77 billion (US$265 million), compared with NT$1.66 billion a year earlier and NT$7.36 billion in losses in the second quarter.

The Taoyuan-based company said no signs of marked improvement were on the horizon, with corporations and consumers tightening their belts amid fears of economic recession.

Unlike the last drastic drop in prices caused by oversupply in 2001, this time sagging demand is compounding the dynamic random access memory (DRAM) industry’s woes, company spokesman Pai Pei-lin (白培霖) told reporters.

“The economic slowdown has greatly hurt consumption,” Pai said. “Companies and consumers are putting off buying new PCs and consumer electronic gadgets such as TVs and handsets.”

Most customers — from PC makers to consumer electronics suppliers — have trimmed their shipment forecast for this year, Pai said.

With demand still stagnant, chip prices could continue to drop toward the US$1 per unit benchmark for PC memory chips in the fourth quarter, after falling 49 percent in the third quarter year-on-year, Nanya said.

After six consecutive quarters of losses, Nanya said it had NT$14.2 billion in cash to date after receiving NT$20 billion in syndicated bank loans recently. But the figure will drop to NT$4.3 billion after it pays a NT$10 billion corporate bond that is due to be converted to common shares later this month.

Meanwhile, Inotera Memories Inc (華亞科技) yesterday posted NT$4.05 billion in net losses for the third quarter, up from NT$3.24 billion in the second quarter. It made net profits of NT$443 million a year ago.

The chipmaker had NT$6 billion in cash and equivalent as of Sept. 30 and would generate more through its operations this quarter, it said.

Inotera will become a joint venture between Nanya and Mircon Technology Inc after the US chipmakers close a US$400 million deal to buy the 35.6 percent stake owned by Germany’s ailing Qimonda AG next month.

To cope with the prevailing bad market conditions, Inotera started lowering production by 20 percent this month, company president Charles Kau (高啟全) said.

The cut in output is Inotera’s first since its founding in 2003.

Its bigger rival Powerchip Semiconductor Corp (力晶半導體) said on Tuesday it planned to cut output by 10 percent to 15 percent this quarter.

“Aside from cutting production, there is no other way to help PC memory chipmakers survive this downturn,” said Liu Szu-liang (劉思良), who tracks the memory chip industry for Yuanta Securities (元大京華證券).

“But a 20 percent reduction is still not big enough to solve the problem of oversupply,” Liu said.

Inotera said production expansion could slow to a 10 percent quarterly pace this quarter from 28 percent in the third quarter.

The company may also trim planned capital spending for the year to NT$21 billion from NT$23 billion.

Nanya said it would not cut capital spending for this year, projected at NT$20 billion.

The nation’s major DRAM stocks dropped between 2.49 percent and 3.45 percent yesterday, underperforming the benchmark TAIEX index, which slid 1.62 percent.
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