Led by Powerchip Semiconductor Corp (力晶半導體), shares of the nation’s major computer memory chip makers jumped by nearly the 7 percent daily limit as chip prices rebounded for the first time in six months on Hynix Semiconductor Inc’s plan to reduce output by 30 percent.
Joining their Asian peers, the stocks of Powerchip and Nanya Technology Corp (南亞科技), Taiwan’s second-biggest maker of dynamic random access memory (DRAM) chips, rallied 6.84 percent to NT$4.22 and NT$6.4, respectively.
The nation’s third-largest DRAM supplier ProMOS Technologies Inc (茂德) also gained 6.74 percent to NT$2.06.
The price of the benchmark DRAM chip, the DDR2 1G 228X8 eTT, bounced back 3.21 percent to average US$0.77 per unit yesterday as supplies may fall further, Taipei-based market researcher DRAMeXchange Technology Inc (集邦科技) said.
Hynix’s first production cuts this year may have offset the anticipated adverse effect of the government’s implementation of new accounting rules next month.
Based on the Statement of Financial Accounting Standards No. 10, local companies will have to book their inventory write-offs as costs of goods sold rather than as non-operating items.
In other words, the new rule will force companies to essentially mark inventory to market, which could lead to greater inventory impairment losses and erode gross margin.
“For local DRAM makers, the new accounting standard may weaken companies’ profitability and cut their gross margins,” said Alex Huang (黃國偉), an assistant vice president of Mega International Investment Service (兆豐證券). But, “it [profit erosion] is less of a concern at the moment when compared to the survival issue DRAM players are facing.”
Huang attributed the DRAM stocks’ surge yesterday to investors’ growing optimism that domestic memory chipmakers may have a more secure future thanks to the government’s aid proposal.
A Powerchip official agreed with Huang.
“At this point, the harm done by the new accounting rule will be relatively small as all figures [including gross margin] have fallen into the red already,” Powerchip spokesman Eric Tan (譚仲民) said by telephone.
Powerchip posted NT$15 billion in losses in the third quarter with gross margin at minus 59.7 percent.
SinoPac Securities Corp (永豐金證券) analyst Sophie Chuang said in a client note yesterday that she remained cautious about the sector’s long term outlook, despite recent production cuts by major players that could reduce global output by between 15 percent and 20 percent starting next month.
Chuang said that any short-term change in supply and demand could be just an illusion because major players — now running at low utilization rates — may act to increase production as soon as they see signs of recovery.
Local DRAM companies will not be the only victims of the implementation of the new accounting rule, however. Huang said the new accounting standard would also cut into the bottom line of local companies with inventory issues, especially construction companies.
In Taipei trading yesterday, selling pressure also emerged on shares of cement, steel, construction and flat-panel display sectors, which have seen low gross margin, falling product prices and high inventory turnover this year.
It is a common business model adopted by local construction companies to build inventories — including idle land, unsold housing and property bonds — that are at least 10 times higher than their paid-in capital, Huang said.
As most local construction companies are small, they would be vulnerable to price volatility and Taiwan’s property market was quite volatile, he said.
Additional reporting by Kevin Chen
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US