A year after the collapse of Lehman Brothers led to the biggest global recession in almost a century, their are signs of a recover in the PC industry.
Taiwan's five largest DRAM makers continued to report big losses in the second quarter but the results marked a rebound from the first quarter and August sales showed even more improvement as DRAM prices kept moving higher.
DRAM prices have risen slowly but steadily since hitting bottom in mid-December of last year. The price of the most popular variety of DRAM, 1GB DDR2 (double data rate, second generation) DRAM, has soared 132.4 percent since the beginning of this year, according to investment bank Credit Suisse, and is up 55.7 percent in the third quarter alone.
Rising prices helped push August revenues much higher for Taiwanese DRAM makers, which continue to struggle to repay debt and restructure.
"DRAM selling prices have steadily risen and Powerchip has gradually increased production, resulting in a significant increase in sales revenue for August," said Eric Tang, a vice president at Powerchip Semiconductor in Taipei.
Taiwan's five biggest DRAM makers reported combined revenue of NT$12.30bn ($378.4m) in August, up 18.6 percent from July's NT$10.37bn. Revenue for the companies has steadily increased since hitting lows in the first quarter.
The companies over-invested in new factories when the market was hot a few years ago and loans were easy to get, but paid the price with a two-year DRAM glut that sent chip prices down well below profitable levels. The Taiwan government has had to intervene with banks to delay loan repayments for the companies, and it even set up an entity to restructure the industry, Taiwan Memory Company (TMC).
The DRAM price increases are driven by a number of factors, but mainly resurgent demand for computers, the main end-product for DRAM. August and September usually mark the beginning of the hot sales season for PCs and notebooks due to back-to-school purchases and as stores stock shelves for the holiday season. This year is different both because the global recession has caused some analysts to question how strong the back-to-school season will be and because software giant Microsoft will release a major operating system upgrade in Windows 7.
Jenny Lai, computer industry analyst at CLSA Asia-Pacific Markets, predicts PC shipments will post year-on-year growth for the first time in a year during the fourth quarter due to the launch of Windows 7 in late October and on strong sales of laptop PCs.
The improving PC market couldn't come at a better time for Taiwanese DRAM makers
The five companies continued to report losses in the second quarter, but their combined loss narrowed to NT$27.53bn from a NT$36.97bn loss in the first quarter, according to financial reports they filed to the Taiwan Stock Exchange. Revenue also improved slightly, to NT$26.54bn from NT$21.39bn. The figures remain well below last year. The five companies reported combined losses of NT$24.73bn in the second quarter of 2008, on much higher revenue of NT$51.92bn.
Powerchip Semiconductor's net loss in the second quarter widened to NT$11.73bn from a loss of NT$7.27bn at the same time last year. But its revenue fell to NT$4.68bn compared to NT$16.88bn last year. Powerchip's loss and revenue in the second quarter both marked slight improvements compared to the first quarter of this year.
ProMOS Technologies reported its net loss narrowed to NT$2.38bn from a loss of NT$5.62bn the same time last year. Its revenue slumped to NT$2.11bn from NT$9.39bn, but improved compared to first quarter revenue of just NT$1.81bn.
Unlike the first quarter, when only one of Taiwan's five big DRAM makers reported higher losses than revenue, this time three of the chip makers reported revenue higher than losses, important because they need to bring in money for operating expenses and to pay off debt.
Winbond Electronics posted a net loss of NT$2.75bn during the second-quarter, up from a loss of NT$1.28bn the same time last year. Revenue fell to NT$4.20bn from NT$6.42bn.
Inotera Memories reported a net loss of NT$4.11bn, worse than its NT$3.27bn loss last year but up compared to the first-quarter. Revenue fell to NT$7.46bn from NT$9.70bn, but was higher than the first-quarter's NT$6.36bn.
Nanya Technology's net loss in the second-quarter narrowed to NT$6.55bn from NT$7.29bn last year, and much improved from its NT$10.51bn loss in the first-quarter. Revenue fell to NT$8.09bn from NT$9.53bn last year.