Taiwan's dynamic random access memory (DRAM) chip manufacturers are fighting an uphill battle for survival as prices continue to slump, officials at Taiwan Ratings Corp (
Taiwan Ratings associate director Tony Tsai (蔡東松) said several DRAM makers here may encounter liquidity shortfalls in the first half of next year if product prices continue to fall and if DRAM makers are unable to attract fresh finance.
"We expect to see the fate of some cash-strapped DRAM makers unfold between January and June next year if the current situation fails to improve."
Currently, Taiwan has five DRAM makers -- Mosel Vitelic Inc (茂矽電子), Winbond Electronics Corp (華邦電子), Powerchip Semiconductor Corp (力晶半導體), Nanya Technology Corp (南亞科技) and Promos Technologies Inc (茂德科技) -- which all suffered operating losses ranging from NT$1 billion (US$28.95 million) to almost NT$5 billion in the first half of this year.
Tsai said some of these companies would need to pay back corporate bond issues in the first half of next year, further pressuring their cash positions.
The industry weakness has made it more difficult for DRAM makers to secure bank loans or raise funds through overseas issues, he added.
Taiwan's DRAM makers face great difficulty in competing against foreign counterparts because they are much smaller in size, market share and lack research development capabilities, Tsai said.
Each Taiwan DRAM maker's global market share stands below five percent, compared with Samsung's 20 percent and Micron's 16 percent, he noted.
As many companies are mainly concentrated on DRAM production and depend heavily on technology transfers from overseas manufacturers, their technologies and manufacturing abilities would be seriously affected once their overseas partners decide to withdraw from such production, he said.
Oversupply in capacity utilization of DRAM makers is likely to continue and add pressure on companies' cash position and credit quality, unless manufacturers effectively cut back production or certain key suppliers withdraw from the market, Tsai said.
The price trend of DRAM chips, the consolidation of major players in Japan, South Korea and Europe, and PC demand following the introduction of Windows XP operation system and Intel's Pentium 4 processor would be crucial to the credit risks of local DRAM companies in the coming year, according to Taiwan Ratings.
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