Fri, Feb 10, 2012 - Page 11 News List

Powertech income drops 10.9% in Q4 on disk woes

SHORT-TERM WOES:Supply problems in Thailand have been fixed and the global economy is recovering, so the worst should be over for the DRAM industry

By Kevin Chen  /  Staff Reporter

A shortage of hard disk drives caused by Thailand’s floods and the uncertainty over Europe’s persistent debt problems sent net income at the nation’s biggest computer memorychip packager down 10.9 percent in the fourth quarter of last year.

Powertech Technology Inc (力成科技), whose customers include Japan’s Elpida Memory Inc and Toshiba Corp as well as Kingston Technology Co of the US, said yesterday that its consolidated net income for the fourth quarter was NT$1.35 billion (US$45.7 million), down from NT$1.52 billion in the previous quarter and down 25.7 percent from the same period a year earlier, when it reported net income of NT$1.82 billion.

Earnings per share were NT$1.69 in the fourth quarter and reached NT$8.01 for the whole of last year, the Hsinchu-based company said in a report posted on its Web site.

That compares with earnings of NT$1.89 Powertech reported in the third quarter, NT$2.5 in the fourth quarter of 2010 and NT$10.53 for the whole of 2010.

Consolidated revenue in the fourth quarter totaled NT$9.72 billion, up 0.1 percent quarter-on-quarter, but down 3.4 percent year-on-year.

The company said the outlook for the global economy was better this quarter but it was still keeping a cautious attitude toward developments in the European debt problem.

As for the disruption of hard disk drive supply chain in the fourth quarter, Powertech said production had resumed and it expected global PC production would continue growing modestly, which would help the recovery of the upstream supply chain.

“The DRAM industry’s worst time seems to have passed,” Powertech said in the report.

The company said the demand for mobile DRAM and NAND flash remains strong and that although the demand for commodity DRAM remains weak, the situation was likely to improve in the second quarter or the third quarter.

“Supply is expected to meet demand in the second quarter or by no later than the third quarter, and prices will be reasonable to allow DRAM suppliers to survive and the IT industry to have a healthier development,” Powertech said.

The company also downplayed market worries about the financial difficulties of the world’s third-largest DRAM chip firm Elpida, one of its major clients.

“It seems like Elpida will sail smoothly through this tough financial challenge,” Powertech said in the report.

Overall, the company said it expected first-quarter revenue would be lower than the fourth quarter level because the current quarter would be the “trough quarter” this year.

However, the revenue is expected to grow in the second quarter by including Greatek Electronics Inc’s (超豐電子) sales, it said.

Greatek is a small consumer integrated circuit testing and packaging firm, whose 44.09 percent stake was acquired by Powertech last month through a tender offer for NT$6.17 billion in total, enabling Powertech to provide services ranging from the lower-level and mid-range segment to the high-end packaging and testing technology.

To enhance its profitability, Powertech said it planned to adjust its business mix by reducing revenues of its volatile DRAM business to 60 percent in the first quarter, from 68 percent in last quarter, and then down to 50 percent in the second quarter, because of industry gluts and falling prices.

Revenue from NAND flash would stay at 30 percent this quarter and the next quarter, while that from the logic memory business would increase to 20 percent in the second quarter from 2 percent last quarter, it said.

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