Winbond Electronics Corp is hedging its bets. A short-term oversupply of memory chips and falling spot prices hurts profits. But a diversified product line that includes thin film transistor liquid crystal display (TFT-LCD) driver integrated circuits means slack demand in one area of the business can be covered by strong demand in another.
"For Winbond, the good thing is, if DRAM demand is not so strong, they still have non-DRAM products," said Connor Liu, an analyst at SG Securities. Winbond is a designer and manufacturer of integrated devices such as dynamic random access memory (DRAM) chips.
The average spot price for 64 Mb DRAM was quoted at US$7.81 on Monday, according to DRAMeXchange.com, a marketplace dedicated to DRAM global trading on the Internet. In early August, market watchers had been anticipating a spot price of nearer US$9 or even US$10.
On Saturday, Winbond announced August revenue came to NT$5.58 billion, nearly three times revenues in the same month a year earlier. Although the company has not stated a forecast for the year, market watchers expect revenue for the year of about NT$55 billion.
Revenue from dynamic random access memory chips would account for about 50 percent to 60 percent of that, Winbond said.
The remaining 40 percent is expected to derive from Win-bond's other products, which include multimedia integrated circuits and consumer electronic integrated circuits. Speech and CD-ROM IC products experienced strong revenue growth in August, Winbond said.
With prices for memory depressed, Winbond's development of TFT-LCD driver integrated circuits comes at a time when Taiwan's display manufacturers are boosting output to meet growing demand for LCDs in monitors, notebooks, mobile phones and electronic information appliances. The result: a severe shortage among local and foreign companies, such as Sharp, NEC and Texas Instruments for driver ICs.
The drivers are used to drive the transistors in an LCD panel.
Taiwan's TFT-LCD manufacturers are predicted to take up 20 percent of the global market for LCDs in 2000, up from 3 percent in 1999, the Industrial Technology Information Service was reported as saying recently. Overall production value by the six TFT-LCD manufacturers will reach nearly NT$90 billion this year, it said.
Winbond plans to begin manufacturing its driver ICs on a mass-production basis in the fourth quarter of the year, and a monthly production volume next year of 300,000 IC chips.
Local media reports say the chips could generate as much as NT$4 billion in revenue for the company next year and the company could command 30 percent of the local driver IC market.
Production of the driver chip comes after several year's research and development, the acquisition last year of a TFT-LCD driver IC division from US-based and NASDAQ listed Cirrus Logic, and a technology and licensing agreement last year with Vivid Semiconductor. As part of the agreement, Vivid transferred driver IC technology which lowers TFT-LCD power dissipation by up to 50 percent.
Following successful strategic agreements with Toshiba, Winbond in 1998 set up a TFT-LCD manufacturing joint venture between itself, Toshiba and Walsin Lihwa Group, called Hann Star Display Corp. Hann Star is now one of the major TFT-LCD manufacturers. The firm recently announced plans to build two fourth-generation TFT-LCD plants in the second half of 2001.
But for Winbond, the development of the driver ICs has required a sacrifice of capacity output. It will reportedly use its two 6-inch wafer foundries to make the driver ICs. That's no bad thing, analysts say, because it's a good way of using older wafer foundries for non-DRAM business, and devoting the most advanced technology to DRAM production in the new ones.
But with no new capacity to come on line in the near future, and in 2003 at the very earliest, Winbond faces the risk of losing out if DRAM prices and demand picks up. "If DRAM prices go up significantly in the fourth quarter, it can't post the same sales as pure DRAM makers," said SG Securities' Connor.
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