Company Will Cut DRAM Chip Output Amid Supply GlutElpida Memory Inc. said it expects to post an operating loss of 15.6 billion yen ($144.6 million) for the second quarter ending Sept. 30, and it will reduce output of dynamic-random-access-memory chips by 10% amid sluggish market conditions.
The news came after Powerchip Semiconductor Corp. said this week it will cut DRAM output by 10% to 15% to cope with price declines. Elpida said it plans to cut DRAM chip output starting next week.
Elpida and other major DRAM makers in Asia have been suffering from a supply glut, which has put most chip makers in the red this year. Analysts have said Elpida, Japan's sole maker of DRAM chips -- widely used in personal computers -- isn't likely to turn a profit in the near term. The company had an operating profit of 6.14 billion yen in the year-ago second quarter.
Chief Financial Officer Toshiaki Hagiwara said Elpida has seen a "huge" plunge in chip prices, without providing specifics. He said the company is seeing sluggish demand for PCs and mobile phones in the second half of this year, a traditionally strong selling season for tech products.
Elpida reported an operating loss of 15.62 billion yen for the quarter ended June 30.
Elpida's shares plunged Tuesday after Deutsche Securities sliced 22% off its 12-month target price on lower earnings estimates. Deutsche now has a target price of 3,500 yen on the stock. Elpida fell 3.8% to 2,015 yen in closing Tokyo trading.
Separately, Hynix Semiconductor Inc. of South Korea said Tuesday it has no plans to further cut memory-chip output for this year despite prolonged oversupply and weak demand in the global market.
"We'll keep our output plan for this year as scheduled," said a company spokeswoman Seong Ae Park.
By: Yuzo Yamaguchi
Wall Street Journal; September 10, 2008
