Nanya Technology Corp (南亞科技) and Inotera Memories Inc (華亞科技), two memorychip manufacturing arms of conglomerate Formosa Plastics Group (台塑集團), could extend their losses this year amid weakening global demand after they reported massive losses last year, an analyst said yesterday.
“Global demand for DRAM chips remains weak,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said. “It is possible that DRAM prices will be depressed and continue to squeeze the two companies’ profitability this year.”
Nanya announced on Wednesday that it posted NT$39.88 billion (US$1.33 billion) in net losses last year, compared with NT$15.13 billion in net losses recorded in 2010.
In the fourth quarter alone, the company incurred NT$10.99 billion in net losses after it witnessed its average selling price fall 12 percent during the period.
Inotera said it registered NT$21 billion in net losses last year compared with NT$10.66 billion in net losses in 2010, after the company posted NT$6.03 billion in net losses for the fourth quarter because of falling shipments.
Although Nanya said it expects DRAM contract prices to continue to rebound this year after a mild recovery seen this month, Hsu said he is not so optimistic.
“The recovery in pricing was pretty much a seasonal factor because of a buying spree ahead of the Lunar New Year holiday and it remains to be seen whether the upside will continue,” Hsu said.
Hsu said Taiwanese memorychip makers have just upgraded their production technology to a 40-nanometer process from a 50-nanometer process, while their South Korean rivals, such as Samsung Electronics Co, have commenced using a more advanced 28-nanometer process.
“Nanya and Inotera still encounter higher production costs compared with their South Korean rivals, and the weakening pricing is expected to deal a serious blow to the two companies,” Hsu said.
To tackle the fragile global demand, Nanya and Inotera said they have decided to cut their capital expenditure by 67 percent this year from a year earlier to NT$7.4 billion.
They are also planning to upgrade their production technology to a 30-nanometer process this year to lower operating costs and boost their competitiveness.