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
DOLLAR CHALLENGE: BRICS countries’ growing share of global GDP threatens the US dollar’s dominance, which some member states seek to displace for world trade US president-elect Donald Trump on Saturday threatened 100 percent tariffs against a bloc of nine nations if they act to undermine the US dollar. His threat was directed at countries in the so-called BRICS alliance, which consists of Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates. Turkey, Azerbaijan and Malaysia have applied to become members and several other countries have expressed interest in joining. While the US dollar is by far the most-used currency in global business and has survived past challenges to its preeminence, members of the alliance and other developing nations say they are fed
LIMITED MEASURES: The proposed restrictions on Chinese chip exports are weaker than previously considered, following lobbying by major US firms, sources said US President Joe Biden’s administration is weighing additional curbs on sales of semiconductor equipment and artificial intelligence (AI) memory chips to China that would escalate the US crackdown on Beijing’s tech ambitions, but stop short of some stricter measures previously considered, said sources familiar with the matter. The restrictions could be unveiled as soon as next week, said the sources, who emphasized that the timing and contours of the rules have changed several times, and that nothing is final until they are published. The measures follow months of deliberations by US officials, negotiations with allies in Japan and the Netherlands, and
Foxconn Technology Group (富士康科技集團) yesterday said it expects any impact of new tariffs from US president-elect Donald Trump to hit the company less than its rivals, citing its global manufacturing footprint. Young Liu (劉揚偉), chairman of the contract manufacturer and key Apple Inc supplier, told reporters after a forum in Taipei that it saw the primary impact of any fresh tariffs falling on its clients because its business model is based on contract manufacturing. “Clients may decide to shift production locations, but looking at Foxconn’s global footprint, we are ahead. As a result, the impact on us is likely smaller compared to
TECH COMPETITION: The US restricted sales of two dozen types of manufacturing equipment and three software tools, and blacklisted 140 more Chinese entities US President Joe Biden’s administration unveiled new restrictions on China’s access to vital components for chips and artificial intelligence (AI), escalating a campaign to contain Beijing’s technological ambitions. The US Department of Commerce slapped additional curbs on the sale of high-bandwidth memory (HBM) and chipmaking gear, including that produced by US firms at foreign facilities. It also blacklisted 140 more Chinese entities that it accused of acting on Beijing’s behalf, although it did not name them in an initial statement. Full details on the new sanctions and Entity List additions were to be published later yesterday, a US official said. The US “will
RSS