DRAM Supplies Forecast to Run Short in 2nd Half: Nanya

Taipei, Jan. 24, 2008 (CENS)--Nanya Technology Corp. forecast global supplies of DRAM (dynamic random access memory (DRAM) chips will become tight in the second half this year, given the fact that the market recovery has begun taking hold in the first quarter of the year.

Nanya executives pointed out that market rebound will become stronger in the second quarter. They projected contract prices of 1Gb DDRII chips to surge at least 40% to US$2.5-3 apiece some time next quarter from current US$1.8 or so.

The company's spokesman, P.L. Pai, noted that contract prices of the chips began bouncing back shortly after spot prices sprang as a result of inventory backlogs at retailers running low. He estimated contract prices of the chips will likely rise only at moderate rate throughout this quarter and the growth will likely gather pace next quarter in anticipation of eager expansions of memory capacity in personal computers in conjunction with rollouts of new version of Microsoft Vista.

Pai felt that DRAM demands from end-user market are not weak now and many of his company's customers have come to negotiate orders for delivery in the second half of the year, showing signs of recovery.

Nanya is not alone on the optimistic side. The company's 300-mm fab subsidiary, Inotera Memories Inc., projected price surges will gain strength in the second quarter and the chance for the prices to slump is unlikely for now. Inotera executives ascribe recent rise of contract prices mostly to inventory buildups for the upcoming Chinese New Year shopping.

Inotera President Charles Kao pointed out that behind price rebound in the second quarter is mainly the supply shortage caused by phase-outs of all 200-mm wafer fabs industry-wide on cost considerations and slowdown of expansion plans at many DRAM makers.

Inotera and Nanya, both under the Formosa Plastics Group, underwent a combined loss of over NT$10 billion (US$312 million at US$1:NT$32) in the fourth quarter of 2007, with Inotera alone losing NT$3.6 billion (US$114 million), the lowest loss of all Taiwanese DRAM chipmakers'. Regardless of the loss, Inotera still made NT$0.28 a share throughout 2007 thanks to profits it made in the first three quarters.

Their domestic industry peers-PowerChip Semiconductor Corp. and ProMOS Technologies Inc.-are estimated to each lose around NT$10 billion in the fourth quarter of 2007.

Although Nanya and Inotera are optimistic about market prospects for this year, they maintain plans to cut capital expenditures this year, with Nanya projecting to slash the spending to NT$40 billion (US$1.2 billion) from 2007's NT$47 billion (US$1.4 billion) level and the other one to ax the outlay to NT$30 billion (US$937 million) from NT$44 billion (US$1.3 billion) in the meantime.

Nanya will focus its spending mostly on capacity expansions at in-house 300-mm wafer fabs and bettering its 70-nm process technology. Inotera will spend the money to boost its 70-nm process capacity.