DRAM stocks feel effects of fall in US counterpart's shares
December 23, 2012, 12:01 am TWN
TAIPEI--Shares of Nanya Technology Corp. and Inotera Memories Inc., two of Taiwan's leading memory chip makers, took a beating Saturday morning after shares of U.S.-based counterpart Micron Technology Inc. tumbled on Wall Street overnight, dealers said.
The plunge in Micron shares was the result of the company's widening losses for its fiscal first quarter, which has dampened market sentiment toward the earnings outlook of the global dynamic random access memory (DRAM) business, they said.
As of 11:39 a.m., shares of Nanya Technology had lost 7 percent, the maximum daily decline, to NT$2.45 (US$0.08), while shares of Inotera Memories had shed 4.28 percent to NT$3.58. The benchmark weighted index was up 0.27 percent at 7,539.94 points.
“As Nanya Technology and Inotera Memories have close business ties with Micron, their share prices have been highly correlated,” Horizon Securities analyst Benson Huang said.
“It was no surprise that the two local DRAM stocks came under heavy selling pressure after investors took cues from a dive in Mircon shares,” Huang said.
Inotera Memories is a joint venture between Nanya Technology and Micron. Both Nanya Technology and Inotera Memories are the DRAM manufacturing arms of conglomerate Formosa Plastics Group.
Micron shares fell almost 7 percent on Wall Street overnight, the steepest drop since June 21 after it reported the disappointing quarterly result.
The U.S. DRAM maker said it posted US$275 million (NT$8 billion) in net loss or US$0.27 in loss per share for the quarter ending in November, extending from US$187 million in net loss or US$0.19 recorded over the same period of last year.
The latest loss per share was worse than an estimate of US$0.20 by market analysts.
“Micron's widening losses were evidence that weakening demand for personal computers in the global market kept haunting the world's DRAM business,” Huang said. “In the wake of Micron's losses, more and more investors believed Nanya Technology and Inotera Memories will continue to suffer losses and the chance to turn a profit any time soon is very very slim.”
In the first nine months of this year, Nanya Technology incurred losses of NT$27.15 billion, or NT$1.79 in loss per share, while Inotera Memories recorded NT$11.82 billion in net loss or NT$2.26 in loss per share during the same period.
“Although DRAM prices showed signs of a recovery recently, the rebound was not strong enough to help the business make a turn around,” Huang said. “The weakness of the PC market has prompted the DRAM sector to cut capital expenditure for 2013.”
According to DRAMeXchange, a research unit at Taiwan-based market advisory firm TrendForce, the global DRAM sector is expected to scale down production by cutting capital expenditure by 21 percent in 2013 from a year earlier.
Huang said the world's semiconductor sector is undergoing inventory adjustments in the current quarter and the move to cut inventory is expected to continue into the first quarter of next year.
“The DRAM business, in particular, remains weak so that uncertainty over market demand is expected to create further volatility for these makers' share prices,” Huang said.