Powerchip says sales will quintuple

Powerchip Semiconductor Corp (力晶半導體), Taiwan's second-largest maker of memory chips, said sales will quintuple in the next two years as a new plant using technology from Mitsubishi Electric Corp begins production.

"We will make US$1.5 billion by the end of next year," Powerchip Chairman Frank Huang (黃崇仁) said in an interview. "We expect to have a 10 percent share of the world market."

The company took 4 percent of the market last year, with sales of NT$11.2 billion (US$324 million).

Powerchip is betting the chip industry will rebound strongly from its worst-ever year last year, when demand for the chips that power mobile phones, computers and other electronics faltered worldwide. Memory-chip sales fell to about US$11 billion from about US$30 billion a year earlier.

Ben Akrigg, who counts shares in Taiwan memory-chip makers among the US$2.5 billion he helps invest for Morley Fund Management, said the strength of the recovery, will depend on growth in personal-computer sales. He's more guarded than Powerchip.

"It all depends on the price and outlook for memory chips," he said. "Powerchip will probably take about 5 percent to 6 percent of the market," he said.

Rick Hsu (徐禕成), an analyst with Nomura Securities Co, which helped Powerchip raise US$149 million earlier this month for its plant, said he thinks sales next year will be two-fifths less than the company's estimate.

Powerchip's new US$4.3 billion plant, which opened Tuesday, will cut costs by as much as a third by more than doubling the yield of chips that can be made from the silicon wafers. Hsu said even a tripling of sales next year won't support the US$1.6 billion the company said it plans to spend on the plant.

"Powerchip will have to rely on outside funding," said Hsu, whose company helped the company raise US$149 million earlier this month for the plant. "They'll probably need somewhere between US$300 million and US$500 million next year."

The company said yesterday it expects sales to meet its funding requirements. About a third of its production will be sold to Mitsubishi Electric, Powerchip said.

Powerchip and Nanya Technologies Corp (南亞科技), Taiwan's largest memory-chip maker, are wild cards in the competition for market share as the number of dominant players in the memory chip business shrinks to five from about 15 a decade ago.

Powerchip said it has been in talks with Elpida Memory Inc, a venture between Japan's Hitachi Ltd and NEC Corp, which is taking over memory chip production from the Japanese companies as they exit the commodity business.

"We've pushed Elpida back to talks with Mitsubishi Electric,"Powerchip President Michael Tsai (蔡國智) said in an interview.

"The two need to cooperate more closely on technology."

Powerchip doesn't rule out the possibility of cooperating with Elpida, which is also running a 12 inch wafer plant in Japan, said Eric Tang (譚仲民), a Powerchip vice president.

The three Japanese companies and Powerchip, which use the same type of technology that stacks memory cells in layers on a chip's surface, will probably need to team up to share development and manufacturing costs, analysts said.