Mon, Nov 03, 2008 page12

• ProMOS posts record-high losses

  SURVIVAL GAME In the first nine months of this year, the company recorded losses of NT$22.46 billion, about 10 times the losses during the previous year

  • By Lisa Wang / STAFF REPORTER
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  ProMOS Technologies Inc (茂德科技), the nation’s third-biggest maker of computer memory chips, posted record-high quarterly losses after chip prices nosedived on supply glut and shrinking demand.

  Losses grew to NT$8.79 billion (US$266.4 million) in the July to September period, compared with net losses of NT$2.92 billion in the same period last year, the company said in a statement on its Web site on Friday.

  The chipmaker did not provide an outlook for this quarter.

  Joining other players in the industry, ProMOS said earlier last month it would shut down a less advanced 8-inch plant, which could help reduce output by between 10 percent and 15 percent in the fourth quarter to help it survive the latest slump.

  In the first nine months, ProMOS said net losses reached NT$22.46 billion, compared with a net loss of NT$2.41 billion a year earlier.

  As of the end of last month, the price of computer memory chips, or dynamic random access memory (DRAM), fell by more than 40 percent to average at US$1.04 per unit, from U$1.76 earlier this year, following an 85 percent decline last year, Taipei-based market researcher DRAMeXchange Technology Inc (集邦科技) said.

  To stem losses, local DRAM chip supplier Powerchip Semiconductor Corp (力晶半導體) said it would cut output this quarter by between 10 percent and 15 percent while Inotera Memories Inc (華亞半導體) said cuts would reach 20 percent. Inotera is a joint venture of local DRAM chipmaker Nanya Technology Corp (南亞科技) and Germany’s Qimonda AG.

  Qimonda said it would exit the DRAM business by selling its total stake, or 35.6 percent, in Inotera to US chipmaker Micron Technology Inc for US$400 million in cash, as part of an important restructuring plan by the Munich-based company, it said last month.

  As major DRAM chipmakers including Japan’s Elpida Memories Inc started lowering production in September, DRAMeXchange expected their moves could reduce output by 12 percent to 13 percent this quarter from last quarter, adding, however, that the decrease was still not enough to spark a recovery.

  “If DRAM makers cut production at a faster rate — 30 percent in the short run and another 20 percent in the longer term — we believe that would help put the DRAM industry back into a healthy position,” the researcher said in a report.

  This is the only way DRAM chipmakers can survive the downturn after chip prices plunged below cash cost, DRAMeXchange said. Improving cost by migrating to next-generation technology, which is what they would have done in the past, will no longer work, it said.

  DRAM makers would still incur losses if they made chips on next-generation 50-nanometer processing technology, as prices have fallen bellow cost level of US$1.3 to US$1.4 per unit.

  To remain operational, Powerchip said it would cut its capital spending next year by two-thirds, while Nanya said it put off the construction of a new plant after reporting bigger losses and seeing gloomy prospects for the industry, which sustained a double blow from the unresolved supply glut and sagging demand amid a weak economy.

  ProMOS shares have dropped 75 percent to NT$2.15 since early this year, well below the stock’s net value of NT$7.88 per share.
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