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Chipmakers will post losses, ITRI says

Taiwanese semiconductor companies are expected to post the first annual revenue declines this year since 2001, primarily because computer memory chipmakers are seeing a slowdown in demand amid the global economic crisis, a local research house said yesterday.

The industry slump may extend into the first half of next year, causing another 1.6 percent annual decrease in revenues for semiconductor companies, Industrial Technology Research Institute (ITRI, 工研院) said in its latest forecast.

Contract chipmakers, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, may suffer the brunt by posting a 9.7 percent drop in revenues next year from this year, the Hsinchu-based ITRI said.

Local semiconductor companies may report an almost 4 percent fall in revenues for this year for a total NT$1.4 trillion (US$42.7 billion), from NT$1.47 trillion last year, under performing their global peers, which could still eke out 1.3 percent year-on-year growth, ITRI said.

“It will be the first time that local semiconductor companies report a revenue decline since 2001,” ITRI senior semiconductor analyst Vincent Lee (李冠樺) said.

This industrial downturn will be as severe as the one between 2000 and 2001, driven by excessive inventory, Lee said.

“This time, the problem is [stagnant] demand. Chip companies will recover as soon as demand rebounds because they are managing inventory better than in the last downturn,” Lee said.

Taiwanese computer memory chipmakers, or makers of dynamic random access memory (DRAM) chips, are to blame now for the first setback in seven years, Lee said.

Local DRAM companies, led by Powerchip Semiconductor Corp (力晶半導體), may post a 20 percent year-on-year decline in revenues this year following a 14 percent drop last year, the ITRI said.

The computer memory chipmakers made up a fifth of the overall revenues made by the nation’s semiconductor companies.

Prolonged industrial downturn may reshape the nation’s DRAM landscape probably in the second half of next year, if demand does not recover with help from the sale of Microsoft Corp’s new operating system, Lee said.

“Some familiar names may not exist anymore and some big names may take the chance for further expansion as it happens during downturns all the time,” Lee said.

“Starting 2010, you will see a completely different semiconductor landscape,” he said.

After losing a total of NT$90.92 billion in the first quarter this year, major DRAM players in Taiwan are on the verge of running out of cash, but not a single company has shown any intension of quitting the market yet.

“To save local DRAM companies, it is logical that a consolidation will do better than any other way,” Lee said.
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