Tue, Apr 07, 2009 - Page 12 News List

Powerchip announces further production cuts

WORRIES There are mounting fears the firm might experience financial problems similar to those that have plagued rival ProMOS Technologies Inc

By Lisa Wang  /  STAFF REPORTER

Chiayi Mayor Huang Ming-hui, left, addresses onlookers yesterday as a child draws a winner from among 220,000 tickets issued to people who spent consumer vouchers in the city. The lucky winner received a 30-tael gold ingot worth NT$1 million.

PHOTO: CNA

With chip prices still below cost and demand frozen on the economic recession and oversupply, Powerchip Semiconductor Corp (力晶半導體), the nation’s biggest computer memory chipmaker, yesterday said it was cutting production further in a bid to slow cash outflow.

Two weeks ago, the dynamic random access memory (DRAM) manufacturer said it had halved output in the first quarter from its full production capacity.

“We are cutting more output as long as chip prices are still lower than cost levels,” company spokesman Eric Tan (譚仲民) said by phone yesterday, declining to detail its factory utilization.

Powerchip hoped to stem cash outflow by making less chips, a company exchange filing said.

The company has adjusted payment terms with its raw material suppliers, who have given Powerchip their support, Tan said in the filing, without giving financial details.

The chipmaker’s comments came after the Chinese-language Apple Daily reported yesterday that Powerchip had accelerated output reduction by cutting 80 percent of its production capacity and delaying old bill payments totaling NT$10 billion (US$300 million) to raw material suppliers to stave off fast cash outflow ahead of the maturity of the US$158 million outstanding convertible bonds in mid-June.

In addition, Powerchip said last month that it was in talks with credit banks to grant a final approval to a six-month extension to its bank loans, probably more than NT$63 billion as speculated.

Powerchip had losses of NT$32.03 billion in the first three quarters of last year and has incurred NT$133.57 billion in debts as of the third quarter of last year, its financial statement showed.

Shares of Powerchip plunged by almost the 7 percent daily limit — 6.88 percent — to NT$4.47 yesterday on mounting fears the company might follow in the steps of local smaller rival ProMOS Technologies Inc (茂德科技) in experiencing financial problems.

Late last month, ProMOS obtained the approval of a majority of bond holders to repay its debt at a 75 percent discount, but it was forced to push back the transaction as it was still struggling to obtain NT$3 billion in additional bank loans to make the payment.

The stock prices of ProMOS and the nation’s second-largest DRAM supplier, Nanya Technology Corp (南亞科技), declined by 6.67 percent and 6.31 percent to NT$1.4 and NT$7.43 respectively.

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