Nanya Technology Corp (南亞科技) yesterday said it would slash capital expenditure by 22.5 percent this year to NT$22 billion (US$690.37 million) in an effort to weather a severe industry slump as sagging chip demand threatens the DRAM chipmaker’s bottom line.
Nanya Technology plans to slash 40 percent in manufacturing equipment spending this year and another 20 percent next year, it said.
The decision came as the company reported a 60 percent quarterly decline in net profit last quarter to NT$2.64 billion from NT$6.58 billion as sluggish demand pushed chip prices down about 23 percent quarterly.
Photo: CNA
It also followed announcements by South Korean and US peers of significant cuts in capital spending.
On an annual basis, net profit plunged 64 percent from NT$7.53 billion, Nanya Technology said.
Earnings per share plummeted to NT$0.85 last quarter from NT$2.12 in the prior quarter and NT$2.44 a year earlier.
“To cope with the market changes, we are scaling back our capital spending,” Nanya Technology president Lee Pei-ing (李培瑛) told an online news briefing. “Overall, the market condition was worse than we expected. The macroeconomic slowdown, high inflation, rate hikes, the Russia-Ukraine war and China’s [COVID-19] lockdowns have negatively impacted the world economy and dampened consumers’ confidence.”
Macroeconomic effects crippled demand for electronics for servers, PCs, smartphones, TVs and set-top boxes, Lee said.
Networking devices and vehicle electronics are the only two bright spots as demand for some customers rebound due to a reduction in chip inventories, he said.
China showed the weakest demand and the deepest price cuts, as COVID-19 restrictions have reduced production and economic growth, and throttled consumer purchasing power, Lee said.
It remains to be seen how stricter US semiconductor curbs on Chinese companies would affect Nanya Technology’s customers and its Chinese rivals, as there is limited information about the rules, Lee said.
Chinese chipmakers have purchased a lot of manufacturing equipment in advance, so it is unclear how Washington’s latest bans would play out, he said.
Twenty to 30 percent of DRAM chips made by Nanya Technology are shipped directly to Chinese customers, he said.
With uncertainty about the external environment rising, Nanya Technology expects DRAM chip prices to extend the downtrend this quarter and next quarter, he said.
However, the price reductions would be less drastic than last quarter, he said.
“Some [chips] fell at a dramatic rate in the third quarter. Customers might not ask for price cuts that are so large” this quarter, Lee said.
Nanya Technology is facing the risk of dipping into the red, given constant price drops in DRAM chip prices and stagnant electronics demand, Lee said.
The company’s net profit margin dipped to 8.3 percent last quarter from 29.8 percent in the second quarter and 38.1 percent in the third quarter last year, the company said in a statement.
Gross margin fell to 32.6 percent last quarter from 44.1 percent in the second quarter and 49.2 percent in the same period last year.
Nanya Technology does not plan to cut production in response to sagging market conditions, but it is adjusting its product portfolio to match demand, Lee said.
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