Local memorychip maker Powerchip Technology Corp (力晶科技) yesterday said it is looking to cut PC DRAM capacity to a maximum of 20 percent of its total capacity next year as the company gradually retreats from the volatile PC DRAM industry.
Powerchip is now focusing on expanding capacity for relatively stable NAND flash memorychips by transferring half of its sole advanced 12-inch plant to make the chips, which are widely used in mobile devices, such as smartphones and ultrabooks.
Next year, Powerchip targeted to double revenue contribution from NAND flash memory chips to 20 percent of the company's overall revenues,compared to 10 percent currenty.
The company’s latest plan comes after most memorychip makers have been severely hit by an industrial downturn, triggered by a slump in the prices of chips amid overcapacity and slack demand for PCs.
“We have to reallocate our resources as the growth in PC [shipments] will not be as strong as before, as the impact of tablets increases,” Powerchip chairman Frank Huang (黃崇仁) told a media briefing. “We are reducing our exposure to the PC segment and looking to the mobile device segment.”
Huang said the company has learned a lesson from the latest downturn.
“Shrinking IC [size] by migrating to next-generation technology is expensive and no longer guarantees profits. The problem that plagues the industry is overcapacity,” he said.
PC DRAM chips made up 30 percent of Powerchip’s revenues this year, while the contract chip manufacturing business became the company’s major revenue source by contributing 60 percent.
Product diversification would provide a buffer against the volatile PC DRAM business, Huang said.
Powerchip said it has made good progress in its NAND flash business after investing NT$8 billion (US$266 million) on developing new technologies and products since 2005.
“The orders we have received greatly exceed what we can supply. Demand mostly came from China,” company president Alex Wang (王其國) said.
A big chunk of its orders came from flash card makers, he said.
However, Powerchip does not plan to alter its partnership with Japan’s biggest memorychip maker, Elpida Memory Inc, Huang said.
With help from Elpida, Powerchip plans to mass produce PC DRAM chips using 30-nanometer technology next quarter, Huang said.
The chipmaker has no plan to sell any of its stake in Rexchip Electronics Corp (瑞晶電子), its PC DRAM joint venture with Elpida he said.
In response to a question on whether Powerchip was in talks with creditor banks for another extension on its NT$70 billion syndicated bank loan, which after a one-year grace period is scheduled expire at the end of the year, Huang said the company was looking into all possible solutions.
Most PC DRAM makers face a cash crunch. Powerchip’s quarterly losses widened to NT$6.66 billion last quarter, from losses of NT$1.21 billion in the second quarter, because of constant price declines.
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