Nanya Technology Corp (
Taiwan's third-largest computer memory-chip maker by value plans to borrow NT$10.5 billion (US$305 million) to meet expenses of NT$2.5 billion this quarter, company spokesman Charles Kau (
Nanya last week widened its loss forecast by two-thirds, predicting NT$12.2 billion in losses and blaming a global recession that's driven memory-chip prices to half of production costs and forced some chipmakers to jump ship to more profitable segments of the industry.
"We are striving to be the only survivor in Taiwan," Kau said. "The principle of supply and demand tells us some companies have to quit."
Nanya rivals such as Hynix, Mosel Vitelic Inc (
Nanya is betting that the worst is over, as shrinking semiconductor stockpiles cause prices to begin rebounding after plummeting by as much as 90 percent this year. Some chipmakers have cut production to curb losses, causing prices to start recovering, said Daniel Heyler, head of Asia Pacific semiconductor research at Merrill Lynch & Co.
The price of a 128-megabit 8x16 double-data-rate computer memory chip, Nanya's main product, has risen more than a third since the beginning of this month to US$2.
"It's not a rational strategy to sell products below variable costs for a long period of time," said John Lin, who manages the NT$1.4 billion High-Tech Fund at Prudential Securities Investment Trust Co (
Shares in Nanya rose to their daily limit of 7 percent today for the fourth consecutive day to NT$13.25, boosted by the rebound in product prices. The stock has surged 52 percent since the beginning of November.
Among Nanya's major rivals, Korea's Hynix is struggling under about US$6.7 billion of debt and trying to stitch together its second rescue in five months.
Winbond said last month it will produce more non-memory chips, lowering its memory-chip output to 40 percent of the total from about half. Mosel said this month it's in merger talks with German partner Infineon Technologies AG and is also considering linkups with other unprofitable rivals.
Nanya's strategy runs a risk: If it borrows to bide its time, will the company end up with a debt load that will sink it? The company already has NT$40.7 billion in debt. Nanya's debt was 116 percent of equity at the end of September. By taking on an additional NT$10.5 billion in debt, Nanya will almost double its total debt in a year.
Nanya plans to borrow NT$4.5 billion from Chiao Tung Bank (交通銀行) and NT$4 billion from Nan Shan Life Insurance Co (南山人壽) this quarter, Kau said. It has pledged land and equipment as collateral in addition to a guarantee from parent Nan Ya Plastic Corp (南亞塑膠). Nan Ya Plastic, a unit of Taiwan's largest industrial group, Formosa Group (台塑集團), owns 43 percent of Nanya Technology.
The company also plans to borrow another NT$2 billion early next year and to sell new shares, Nanya Vice President Moor Chen said.
"We can only map out our finances for six months," Chen said. "No one really knows what might happen next."
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