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September 24, 2017

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Inotera shares up on price hike hopes, Nanya remains level

TAIPEI, Taiwan -- Dynamic random access memory (DRAM) chipmakers Inotera Memories Inc. (華亞科) and Nanya Technology Corp. (南亞科) moved higher Tuesday morning on expectations that DRAM supply will remain tight in the third quarter and drive up prices, dealers said.

But while Inotera shares sustained their momentum later in the morning, Nanya shares retreated back to where they finished on Monday as investors decided to cash in their gains, they said.

Optimism that product prices may move higher has been accelerating amid speculation that efforts by South Korea's SK Hynix Inc. to upgrade its technology has suffered hiccups, caused a tightening in DRAM supply, dealers said.

As of 11:19 a.m., shares of Inotera had added 5.14 percent to NT$55.20 (US$1.84), with 93.56 million shares changing hands, while shares of Nanya were flat at NT$7.48, falling from an early high of NT$7.70, on trading volume of 6.76 million shares.

The weighted index on the Taiwan Stock Exchange was up 0.37 percent at 9,236.59. Inotera and Nanya are two DRAM manufacturing arms of conglomerate Formosa Plastics Group.

"Speculation has circulated in the market that Hynix has encountered some technical difficulties in the production of chips using the advanced 25 nanometer process," Asia Securities Investment Consultant analyst Chang Chih-cheng said.

"Because the global semiconductor industry enters its peak season in the third quarter, Hynix's lower-than-expected yield rate in 25nm production has prompted many investors to expect that supply will tighten," Chang said.

In a research report, Taiwan-based market advisory firm TrendForce (趨勢科技) said that in addition to Hynix's relatively low yield rate in the 25nm process, industry delays in the development of the 20nm process have also caused a decline in capacity.

DRAM Prices to Rise 5-10% in Q3

TrendForce said tight DRAM supply in the second half could cause prices to rise 5-10 percent in the third quarter from the previous quarter.

Nanya released its own forecast that DRAM prices for the July-September period will rise 2 percent from a quarter earlier, saying solid demand for handheld devices and servers will continue to contribute to the upswing.

"My understanding is that tight DRAM supply due to solid demand for mobile devices caused product prices to rise in the second quarter, even though it is a traditionally slow quarter in the DRAM industry," Chang said.

"It turned out that the consolidated sales of Inotera and Nanya both rose month-by-month in May."

Nanya posted NT$4.16 billion in consolidated sales for the month, up 12.7 percent from April. Nanya's growth was the highest among local memory chip makers on the back of rising shipments and increasing product prices.

Inotera's consolidated sales in May rose 5.8 percent month-on month to NT$7.41 billion, the second highest for any month in the company's history behind only NT$8.15 billion in December 2013.

"Shares of Inotera, which has healthier fundamentals than Nanya, could continue to post gains before the stock faces stiff technical resistance at around NT$60," Chang said.

Chang said Inotera is expected to post NT$6-NT$7 in earnings per share in 2014, compared with NT$3.66 in 2013.

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