An official of Powerchip Technology Corp (力晶科技) said yesterday that the company has decided to raise its capital expenditure for next year by about 40 percent to upgrade its production technology.
The board of directors has approved the proposal to increase the company’s capital expenditure to NT$17 billion (US$533 million) from the previously planned NT$12 billion, Powerchip spokesman Eric Tan (譚仲民) said.
“We aim to speed up the pace of migrating to the 45-nanometer production process from the current 63-nanometer process,” Tan said, adding that “the technology upgrade is expected to be completed in the middle of 2011” and would be financed by the additional funds.
Tan said that as Powerchip has turned profitable in the first half of this year, there are no problems for the company meeting the funding.
In the first six months of this year, Powerchip posted NT$10.3 billion in net profits on a recovery in global demand for DRAM chips after a net loss of NT$20.7 billion posted for the whole of last year.
In 2008, Powerchip incurred NT$57.5 billion in net losses.
As a result of the large accumulated losses, the Financial Supervisory Commission last month turned down an application by Powerchip to issue up to US$179 million in global depository receipts.
Tan said the rejection of the application has had no impact on the plan to increase capital expenditure to upgrade the firm’s technology.
Michael Chiang, an analyst with Taiwan International Securities (金鼎證券), said it was necessary for DRAM makers to advance their production technology as DRAM prices are weakening as the pace of the global economic recovery appears to slow.
“A higher-end production process is expected to cut DRAM makers’ operating costs,” Chiang said. “With operating costs down, the impact from falling product prices is expected to be offset.”
Powerchip’s rivals, such as Nanya Technology Corp (南亞科技) and Inotera Memories Inc (華亞科技), are also planning technology upgrades for the same reason, Chiang said.
In addition, Powerchip said it would also submit another application to issue global depository receipts, but the company did not specify a timeframe.
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