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Fri, Sep 14, 2001 - Page 18 News List

Nanya may delay overseas offering

GRIM OUTLOOK Chip oversupply and an increasingly glum economic outlook looks set to squelch the firm's plans to raise cash to pay for a new manufacturing plant

BLOOMBERG , TAIPEI

Nanya Technology Corp (南亞科技) said it may postpone a sale of shares overseas and defer expansion amid concern the terrorist attacks in the US may hurt PC sales and investor confidence.

Taiwan's second-largest computer memory-chip maker by market value, which had expected to raise NT$8 billion (US$232 million) selling 400 million new shares this year, may delay the sale until demand for computer memory chips revives, said vice president Charles Kau (高啟全) in an interview.

The move comes as an oversupply of memory chips drives down prices to a record. Demand is unlikely to rebound any time soon even if debt-laden Hynix Semiconductor Inc, the third-largest memory-chip maker, fails to secure fresh funds and goes out of business, some investors said.

"Even if Hynix goes bankrupt, it doesn't give Nanya a good opportunity to issue new shares," said James Chen, who manages NT$1.8 billion in stocks at National Investment Trust Co. "People wouldn't forget that Hynix went out of business because of the adverse industrial situation." Hynix wants creditors to agree to a US$5.4 billion bailout package, its second rescue in three months, to stay in business.

Nanya, which sold NT$7.5 billion of shares at the end of last month, planned to raise the money to fund construction of a new plant capable of making 300mm wafers -- 50 percent larger than company's current output. Bigger wafers will be more cost-effective as more chips can be cut from them.

"If we don't go ahead with the sale this year, we'll have to evaluate construction of the [300mm] fab," Kau said. "If we don't spend money on the new fab, we don't need the money."

Memory-chip makers are cutting costs because prices have fallen to US$1.45, about half what it costs to make the chips. Sales will decline by more than a quarter to US$21 billion this year, according to the US Semiconductor Industry Association.

Nanya, which posted a loss of NT$3.8 billion in the first half, will wait until a recovery in demand before it starts construction, Kau said.

"The terrorist attack will certainly impact the IT industry," Kau said. "The outlook looks pretty grim."

"The impact of the terrorist attacks really depends on the follow up action taken by Bush," Kau said.

Unlike Nanya, rivals ProMos Technologies Inc (茂德科技) and Powerchip Semiconductor Corp (力晶半導體) said they haven't changed plans to sell shares overseas to finance expansion. They may not be successful in selling the shares, according to investors.

"There's no chance for any DRAM maker to issue global depository receipts by the end of this year," Chen said. "Where can you find the clients who want to take these new shares?" Nanya Technology shares fell NT$0.80, or 6.9 percent, to NT$10.90. The shares have fallen more than four-fifths in the past year, compared with a 47 percent decline by the TAIEX.

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