| | | Nanya cuts memory investment 10% on trade war impact
Taiwanese supplier to Huawei and Dell confirms boom has ended
CHENG TING-FANG, Nikkei staff writer October 16, 2018 23:42 JST
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NEW TAIPEI CITY -- Leading Taiwanese memory chip maker Nanya Technology on Tuesday trimmed its full-year capital spending and warned that the intensifying trade war between the U.S. and China has dampened demand from users like Huawei Technologies ahead of the holiday shopping season.
The world's fourth-largest supplier of DRAM -- memory chips used in electronics from smartphones to servers -- becomes the first player in the industry to indicate that the market has turned bearish this quarter owing to the trade war.
"The ongoing trade friction is having an impact on supply and demand," Nanya Tech President Lee Pei-ing told reporters. "It's not only about DRAM but about the overall macroeconomic conditions."
The Taiwanese company sees DRAM prices falling around 5% from the previous quarter for the last three months of 2018, confirming that a nearly two-year "supercycle" has moved past its peak.
"We find many end-device makers are turning cautious in the fourth quarter of this year ... the whole atmosphere is going toward the conservative end," said Lee.
Lee said his company has cut capital expenditures for 2018 by more than 12% to 21 billion New Taiwan dollars ($680 million) from NT$24 billion to slow output expansion and to reflect market woes.
He said the anticipated fall in DRAM prices likely will be a correction that continues into 2019. "But we don't see the correction leading to a major price crash," Lee added
Smartphone unit growth has stopped despite the fact that these devices need better DRAM for more advanced features, while the overall PC market looks weak, according to Lee. "There are great uncertainties out there in the tech manufacturing supply chain, Lee said, adding that many suppliers are considering "whether they need to relocate some production out of China."
Based in New Taipei City, Nanya Tech trails South Korean rivals Samsung Electronics and SK Hynix as well as Micron Technology of the U.S. DRAM is a kind of crucial memory chip to go into a wide range of electronic devices ranging from PC, smartphones, servers, set-top boxes and game consoles, to connected cars and others.
Nanya Tech does not directly supply Apple but it counts HP, Dell, Panasonic, Huawei, Lenovo Group, Xiaomi, Asustek Computer, Acer, Kingston and many other global consumer electronics makers as customers.
In September, U.S.-based semiconductor equipment maker KLA-Tencor warned of a slowdown in memory-chip-related sales and sparked concerns that a supercycle was winding down. Semiconductor industry stocks tend to move in tandem with memory chip prices, and the chip industry's demand outlook provides a gauge for electronics demand.
Samsung, the world's biggest maker of memory chips, is reportedly looking at curbing output for next year to keep supplies tight and sustain profitability, while Micron issued a lackluster outlook last month that fell short of analyst expectations.
"We do see DRAM prices dropping and expect the decline to continue into next year, but, in the end, we're not yet to the point that everyone will start to lose a lot of money for 2019," said Sean Yang, an analyst at Shanghai-based research agency CINNO. "But we do see the trade war has weighed on everyone's confidence for making any aggressive investments at the moment ... and we especially see this kind of pessimism among some smaller Chinese companies and domestic consumers there."
For the July-September quarter, Nanya Tech's revenue grew 83.4% on the year to NT$24.37 billion, while net income went up more than 50% to NT$12.87 billion.
Nanya Tech shares closed 5.42% lower at NT$54.10 ahead of its earnings report and have declined about 30% so far this year |
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