Taiwan's big five DRAM makers post massive losses

Taiwan's five largest DRAM makers reported massive losses in a slew of earnings reports filed late Thursday evening, raising questions about how much longer some of them can remain afloat without direct government aid.

The losses call into question Taiwan's plan to restructure its ailing DRAM industry. The government tapped Taiwan Memory Company (TMC) to take the lead in a restructuring and originally offered to invest NT$100 billion (US$2.98 billion). But TMC has said it plans to focus on chip design technology and only needs NT$30 billion.

But the original intent of TMC was to restructure an industry that holds NT$430 billion in debt, much of it owed to Taiwanese banks. Rising losses mean companies will not be able to pay back their loans.

An official from Taiwan's economics ministry said a final allotment for the DRAM industry has not been finalized.

TMC did not respond to phone calls nor e-mails, but Friday was a public holiday in Taiwan.

The DRAM industry sank into the doldrums two years ago as a slew of new factories caused a chip glut, sending down DRAM prices. DRAM chip prices fell to well below the cost to make them last year and have remained below that level. Companies, however, can't stop making the chips because they need money to meet loan payments.

Nanya Technology and Inotera Memories say the first quarter of this year will mark a bottom for the industry, according to presentation material from their investor conferences. Judging by the numbers, it's hard to imagine how things could get much worse without some companies exiting the business.

The combined losses of Taiwan's five biggest DRAM companies in the first quarter of this year eclipsed sales.

The five companies reported a combined net loss of NT$35.93 billion in the first quarter, up from a net loss of NT$32.51 billion in the same quarter a year ago. Revenue was chopped in half to NT$21.39 billion from NT$46.99 billion.

Powerchip Semiconductor said its net loss in the first quarter narrowed to NT$6.29 billion from a loss of NT$9.74 billion at the same time last year. But its revenue fell to NT$3.92 billion compared to NT$14.84 billion last year.

ProMOS Technologies reported its net loss widened to NT$8.60 billion from a loss of NT$8.05 billion the same time last year. Its revenue slumped to just NT$1.81 billion from NT$7.64 billion.

Winbond Electronics posted a net loss of NT$5.22 billion during the first quarter, up from a loss of NT$1.76 billion the same time last year. Revenue was halved to NT$3.13 billion from NT$6.57 billion.

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