Citigroup has lowered its financial forecasts for computer memory chipmakers Powerchip Semiconductor Corp (力晶半導體) and Inotera Memories Inc (華亞科技) respectively by 34 percent and 57 percent primarily because of declining factory utilization and weak chip prices.
Inotera, a joint venture between Taiwan’s No. 2 maker of computer memory chips, Nanya Technology Corp (南亞科技), and US chipmaker Micron Technology Inc, could see NT$16.13 billion (US$467.6 million) in losses this year compared with a previous estimate of NT$10.29 billion, Citigroup analyst Timothy Lam said.
Inotera reported NT$18.06 billion in losses last year because of oversupply and weak demand.
“The company has reduced production recently because it is slowly restarting its ramp with Micron in the next three to six months. By cutting production to 50,000 wafers a month, we can expect production volume to be down significantly in the next several months,” Lam said in the report on Thursday.
Lam said he would not change the “sell” rating on Inotera until he saw progress on the matter of its capacity upgrades.
Lam also lowered his financial forecast for Powerchip, the nation’s largest maker of dynamic random access memory (DRAM), to NT$40.62 billion in losses this year from a previous estimate of NT$30.31 billion in losses.
The downward revision reflected “the cuts in production and lower DRAM spot prices,” Lam said.
He expected Powerchip to fall into deeper losses next year, adjusting his forecast for the period to NT$29.29 billion in losses from a previous estimate of NT$9.05 billion, the report said.
Powerchip lost NT$47.21 billion last year.
The spot price for benchmark DRAM extended a downward spiral this week, ending the week at US$0.78 on Friday, compared with US$0.85 on March 2, said market research house DRAMeXchange Technology Inc (集邦科技), which is based in Taipei.
Lam retained a “buy” rating on Powerchip as the company’s cash dwindled another NT$1.4 billion last month to NT$6.47 billion as it continued to sell its products at a loss.
In addition, without a clear indication of government support, Powerchip may face growing financial pressure if its lenders hesitate to grant a one-year rollover for its NT$37 billion in loans in light of a worsening balance sheet and the maturity of its convertible bonds in June, the report said.
On Tuesday, John Hsuan (宣明智), who has been chosen to head government-led Taiwan Memory Co (台灣記憶體公司), told reporters that the government would not inject capital in any DRAM makers or pursue mergers and acquisitions with local firms in the near term.
To raise funds to repay its debts, Powerchip may borrow funds or issue new equities, which could further dilute the stakes of its existing shareholders, Lam said.
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