Powerchip Technology Corp (力晶科技) expects to make more than NT$10 billion (US$31.67 million) in net profit for a third year next year, bringing its net value back to more than NT$10 per share and paving the way for it to return to trading on the local stock market in 2016, in what could come to be seen as the best turnaround story in the history of Taiwan’s chip industry.
Two years ago, Powerchip was booted from the bourse after its net value dipped to minus-NT$4.53 a share at end of 2012 amid massive losses and towering debts.
The chipmaker blamed an unprecedented slump in the global DRAM industry and a global financial crisis that began in 2008 for its financial troubles.
Succumbing to the severe downturn, Germany’s Qimonda AG unexpectedly filed for bankruptcy in 2008, followed by the collapse of Japan’s Elpida Memory Inc in 2012. Domestic DRAM chipmaker ProMOS Technologies Inc (茂德科技) liquidated assets to repay debts after a 2012 restructuring plan.
With financial support from Formosa Group (台塑集團), Nanya Technology Corp (南亞科技) — the nation’s top DRAM chipmaker — and its DRAM venture with Micron Technology Inc, Inotera Memories Inc (華亞科技), weathered the recession and are now on their way to a transformation. Powerchip remained independent, it said.
“All our peers collapsed, but we survived without any financial support from the government. We did it all by ourselves,” Powerchip chief executive Frank Huang (黃崇仁) said during the company’s 20th anniversary party earlier this month.
Its restructuring efforts are yielding results, as reflected in key financial figures, company data showed.
Last year, Powerchip generated a net profit of NT$11.19 billion, after two unprofitable years with losses totaling NT$42.3 billion. The chipmaker has reduced its liabilities to NT$35.99 billion at the end of this year, compared with its peak of NT$81.29 billion in 2010, company data showed.
In the first half, Powerchip made NT$51.34 billion and it expects the whole year’s net income to surpass NT$12 billion and to hit NT$15 billion next year, Huang said.
“It is not easy to come through such difficulties,” Huang said.
Huang attributed Powerchip’s turnaround to the company’s “open foundry” business model.
Defining the new strategy, Huang said: “Powerchip is the only chipmaker in the world that makes both logic chips and memory chips.”
Huang said the new business model solves what he described as his long-standing bewilderment at memory chipmakers drifting into massive losses during economic slumps, while logic chipmakers continue to eke out profits, he told reporters.
Instead of committing all its capacity to PC DRAM, Powerchip now diversifies by supplying logic chips — such as driver integrated circuits (IC) used in flat panels, power-management chips and CMOS sensors for handset’s cameras. Powerchip also makes DRAM chips only on a contract basis, rather than producing its own-brand DRAM chips, as it did before.
“We were heavily dependent on Intel Corp and Microsoft Corp to make a living,” Huang said. “Now, smartphones have changed the whole [DRAM] industry. Only 30 percent of global DRAM output goes to PCs. Mobile devices even consume more DRAM chips than PCs, and consumer electronics also need DRAM chips.”
“Severs also need DRAM chips. A DRAM supply constraint would concern Google Inc as well,” he added.
A three-way joint venture formed in 2008 with Powerchip, Japan’s Sharp Corp and Renesas SP Drivers opened a door for Powerchip into the drivers IC business, the company said. Powerchip owns a 20 percent share of the venture.
“We are the world’s only chipmaker making driver ICs at cost-efficient 12-inch factories,” Powerchip spokesman Eric Tang (譚仲民) said.
With top customers such as Apple Inc, Samsung Electronics Co and Xiaomi Corp (小米), Powerchip has multiple revenue sources — driver ICs, power management ICs, CMOS sensors and DRAM chips, the company said.
With growing net profits, its net value has improved to NT$2.46 per share in the first half of this year and is expected to climb to NT$6 a share by the end of this year and to NT$10 a share next year, the company said.
Tang said Powerchip will consider resuming local stock market trading after its net value improves to more than NT$10 a share, a threshold for delisted firms to reopen local trading.
Powerchip also expects its debts owed to local banks to fall to NT$10 billion next year from NT$20 billion this year.
Looking ahead, Huang said Powerchip is looking for new niche markets, such as memory chips used in Internet-enabled vehicles and in Internet of Things (IoT) devices.
“IoT is a new market with great potential. IoT needs smaller memory chips. Micron and Samsung are not interested in making such memory chips, but we are. Powerchip sees more business opportunities after transforming itself into a contract chipmaker,” Huang said.
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