Nanya to boost profits with speedier chip

Nanya Technology Corp (南亞科技), one of Taiwan's largest makers of computer memory chips, said it plans to reverse a possible first-quarter loss by producing more high-speed memory chips that run at double the speed of current chips and sell for over twice as much.

Nanya received orders for 1.2 million chips for March and will ship a million so-called double data rate memory chips next month and up to seven million by June, said Executive Vice President Charles Kau (高啟全).

Nanya, which is likely to post a loss in the first three months of this year, is banking on the success of the DDR chip to turn to profit in the second quarter.

"I think we'll be making a loss in the first quarter," said Kau. "In April, May and June, it really depends on how successfully we can promote DDR [chips]. There's still some uncertainty, but we're seeing a pick-up in the market." Chipmakers such as Intel Corp and Advanced Micro Devices Inc have boosted the speed of processors -- the main chip in a computer -- to make personal computers work faster. Regular memory chips, though, are unable to keep pace with these processors, limiting a PC's performance. To clear the bottleneck, enhanced memory chips, such as DDR, are useful.

Tumbling chip prices slashed Nanya's margins, forcing the company to lower its profit forecast twice in the past four months and shelve plans for a new factory. The spot price for a benchmark 64-megabit dynamic random access memory chip fell to US$2.27 Monday, down from US$8.17 when the company listed on the main index last August.

Shares Fall Falling prices also dragged down Nanya's stock. From a high of NT$77.50 at the end of August, the shares fell nearly four-fifths to touch NT$17.4 at the beginning of January.

Last year "was a profitable year, but not very good," said Kau. The company will announce its net income in 2000 at the end of March. Revenue in January fell 14 percent from the previous month to NT$849 million, the company said.

Nanya's DDR chip costs less than US$5 to make, almost the same as a regular memory chip, although it can sell for as much as US$11, more than double the cost.

With a three-to four-month lead over its Taiwan rivals, Nanya aims to exploit its position as the sole volume producer of DDR chips while prices remain firm.

Nanya is likely to get a helping hand from Taiwan's chipset makers, such as Via Technology Inc (威盛電子), which are producing chipsets requiring DDR memory chips.

"If we have enough orders, we'll switch entirely to DDR," said Kau.

Via introduced its chipsets using DDR memory chips in September. The world's second-largest chipset designer chose the DDR chip as a cheaper alternative to a standard developed by US-based chip designer Rambus Inc.