As had been widely anticipated, the bearish stock and dynamic random access memory markets forced memory chip maker Mosel Vitelic Inc (茂矽) to lower its financial target for the year yesterday.
However, Mosel also predicted that the company would reap strong profits next year as demand for servers and consumer products sparks a recovery in the DRAM price from the end of the first quarter of 2001 and as more efficient production methods lower costs. Analysts were predicting otherwise.
"Demand for applications like personal digital assistants will be higher than this year, but I don't think it'll be high enough to lift the DRAM price," said Alfred Ying, an analyst at BNP Paribas Peregrine Securities in Hong Kong. Demand for DRAM was still mainly being driven by demand for personal computers, he said.
Mosel yesterday lowered its revenue target for the year by 21.9 percent to NT$27.85 billion, and its pre-tax profit by 55 percent to NT$5.191 billion, or NT$1.79 a share.
"The new forecast is not that much of a surprise for analysts," said George Wu, an analyst at Taiyu Securities Co, adding that, as a result, the revised target would have no effect on the stock price. Still, "It's really a big difference from the original forecast," he said.
Yesterday, shares in Mosel rose 1.86 percent to NT$21.9 on turnover of 128.2 million shares, the highest in the market.
Mosel, which also makes liquid crystal display driver chips, blamed the readjusted forecast on lower than expected demand for PCs and peripheral products that had pushed down the price for memory chips. "We're producing more supply than the market needs," said Thomas Chang, vice-president of technology transfer coordination at Mosel.
The impact of Y2K, delayed orders awaiting the release of Intel Corp's Pentium 4, and the lack of a new PC platform in the summer meant that, while "the production side remained the same, demand didn't happen" during their normal cycles throughout the year, said Chang. The lower than expected PC demand resulted in excess inventory of memory chips, which pushed down the DRAM price.
Yesterday, the average spot price for the industry standard 8X8 64-megabit DRAM chip was trading down just under 60 percent from its summer peak in July at US$3.58 on DramExchange.com, an e-market place for DRAM trading.
The bearish stock market and less than ideal financial markets also affected Mosel's plans to sell shares in subsidiary ProMOS Technologies Inc, the company said.
"ProMOS' stock price is very low right now, so Mosel won't sell the shares," said Alfred Ying. Shares in memory chipmaker ProMOS closed up 4.2 percent at NT$29.7 yesterday. The subsidiary was trading at over NT$70 in September.
Despite the lowered forecast, Mosel was upbeat about prospects next year as demand for memory chips gets a boost from the growing demand for servers, memory upgrades for new operating systems, network storage systems and consumer products.
"Supply and demand should balance around April," said Chang, who anticipates the excess inventory of memory chips to be "digested" during the first quarter of next year as corporations upgrade to the Windows 2000 operating system. Strong demand for PDAs and games machines, and the anticipated massive growth in Internet-related application storage systems as the transmission of voice over the Internet starts to take priority over data on the Internet highway should provide further demand for memory, said Chang.
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