DRAM maker ProMOS Technolo-gies Inc (
Analysts agreed with the projection, but said its becoming reality depends much on how smoothly the upgrading goes. Promos, a memory chip joint venture between Mosel Vitelic Inc and Siemens AG, announced first half revenue of NT$9.37 billion, 46.5 percent higher than the same period last year. First half net income came to NT$2.7 billion, or NT$1.02 per share.
The first half revenue represents about 36 percent of the NT$26 billion target for the year. Promos has an earnings per share target for the year of NT$3.62.
ProMOS said it's confident it will meet or even beat those targets as revenues surge in the second half of the year with the migration of its production process for DRAM chips to 0.17 micron technology, from the 0.20 micron process used now, and with high spot prices for DRAM.
A successful migration to the 0.17 micron technology process would cut costs per unit by about 30 percent, analysts said. Meanwhile, a spot price of over US$8 in the second half of the year would mark a two or three dollar rise over the price in the first half. "You get double happiness," said Abraham Leu, head of Asian Technology at Prudential-Bache. "One is the spot price goes up; the other is the costs go down."
The spot US market prices for benchmark 64Mb DRAM chips fell to US$8.63 on Thursday, according to the American IC Exchange. As for cost savings, a single 64M DRAM chip now costs less than US$1.6 to produce using the 0.2 micron technology process, ProMOS said.
But that's with a yield rate of more than 90 percent. High yield rates mean high gross profit margins. Conversely, low yield rates caused by the initial introduction of a new production process reduces the yield rate and subsequenty the profit margin. In the first half of the year, and especially from April, Promos growth rate was good, but not as high as expected, said Alex Wu, an analyst at China Securities Co (
That's because the company was having problems migrating to the new 0.17 micron process, he said.
Promos reported second quarter revenues of NT$5.27 billion. The figure was nearly 18 percent higher than the first quarter, but lower than the NT$5.5 billion projected by Wu. "They started migration to 0.17 micron at the beginning of this year, but they didn't perform very well," said Wu. "The yield rate so far has been so low," he said.
With mass production using the 0.17 micron process starting in September, Wu said he'll be watching out carefully for Promos October and November sales figures with the more and increasingly cost-efficient technology, the figures should be higher than usual. "I expect the yield rate to reach 40 to 50 percent by the end of this year," said Wu.
ProMOS reportedly expects production of 128Mb and 256 Mb DRAMS using the 0.17 micron process to constitute 35 percent of total output this year. Sales using the newer technology process should amount to 20 percent of total sales for the year, said Wu. Assuming the transition goes smoothly, it will have a much bigger effect on sales next year, he said.
Promos should also be able to reach its revenue target for the year assuming the transition goes well, analysts said. With low DRAM prices in the first half, Prudential Bache's Leu wasn't too surprised by the first half earnings.
"We expect very strong second half earnings" now that DRAM prices have risen, said Leu, who rates all the DRAM makers a strong buy.
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