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Nanya Technology Co. and Inotera Memories Inc. posted a second consecutive quarter of losses as a switch to a new production technology cut output of memory chips and raised costs.

Nanya, Taiwan’s second-largest memory-chip maker, had a second-quarter loss of NT$1 billion ($31 million), and Inotera, the third-largest, had a shortfall of NT$1.8 billion, the Taoyuan, Taiwan-based companies said in statements today.

Both companies last year began shifting to more advanced production processes developed by Boise, Idaho-based Micron Technology Inc. after the U.S. company joined Nanya as a shareholder in Inotera. The reduction in production capacity meant the companies couldn’t match global leader Samsung Electronics Co. in benefiting from a global rebound in demand for the most common chip used in computers.

The average of 10 analyst estimates compiled by Bloomberg for Nanya was a NT$1.2 billion loss, and the average of 12 estimates for Inotera was a NT$1 billion loss.

“They posted losses because they sacrificed capacity during the quarter for process migration, with higher R&D expenses to also support the move to the new technology,” Andy Hsu, who rates both companies “buy” at Fubon Financial Holding Co. in Taipei, said before the earnings were announced.

Sales Rise

Shares in Nanya rose 0.6 percent to close at NT$24.80 before the earnings announcement. The stock has lost 24 percent this year, compared with a 6 percent decline for the benchmark TAIEX index. Inotera slid 0.6 percent to close at NT$18.20 today, extending its decline this year to 31 percent.

Nanya’s sales almost doubled to NT$15.7 billion. It had a net loss of NT$6.5 billion in the same period last year. Inotera’s revenue climbed 51 percent to NT$11.3 billion, and it posted a net loss of NT$4.1 billion a year earlier.

Samsung posted record operating income last quarter of 5 trillion won ($4.2 billion), fueled by a recovery in demand for computer-memory chips that drove up prices. Its chip business, which includes DRAM and flash-memory used to store data, probably accounted for more than half of its total operating income in the quarter, according to a survey of seven analysts by Bloomberg News.

‘Profitable Soon’

Nanya expects to be profitable soon, spokesman Pai Pei-lin said at a press conference today, declining to say in which quarter the company will post net income.

“We’re sorry that we missed our expectations,” Inotera President Charles Kau said. “There’ll be a turnaround in the third quarter.”

Both companies are switching to Micron’s so-called “stack” manufacturing technology from “trench,” which was developed by Qimonda AG. Micron bought Munich-based Qimonda’s 35 percent stake in Inotera for $400 million in 2008.

Inotera cut its full-year shipment growth forecast, measured in bits, to 50 percent higher than 2009 from an earlier forecast of 70 percent to 80 percent higher because of delays in the transition to the new technology, Kau said today. The lower guidance reflects the company’s own problems and not the wider chip market, he said.

The technical problems will be solved by the fourth quarter, with shipments in bits to double during that period from the third quarter, Kau said.

Demand for memory-chips used in consumer PCs has slowed recently while the corporate market remains strong, he said, adding that prices are likely to be little changed this quarter from the second quarter.

Inotera’s lower output will cut Nanya’s shipment growth, measured in bits, to 35 percent this year from a January forecast of 45 percent because it gets 60 percent of its supply from Inotera, Pai said today.
Nanya Technology Co. and Inotera Memories Inc. posted a second consecutive quarter of losses as a switch to a new production technology cut output of memory chips and raised costs.

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This post was submitted by Harshit Agrawal.