05.07.2001
Winbond sees revenue trending up in 2Q01

• At last Friday's analysts' meeting, Winbond (2344 'Hua Bang Dian') said it expects revenue to grow sequentially in 2Q01, driven mainly by revenue contribution from the consumer IC and LCD driver IC segments. In 1Q01, the non-DRAM segment contributed an aggregate 44% of revenue, with a 40% gross margin.

• Winbond's DRAM segment was a major drag on profitability in 1Q01. Based on the company's guidance, we estimate gross margin on DRAM to be around negative 20% in 1Q01. Delayed yield improvement on 0.175um process technology and low ASP on DRAM are the main causes of the poor gross margin figure. In 1Q01, Winbond under-performed every other local DRAM maker with the exception of Nan Ya Technology (2408 'Nan Ya').

• Nevertheless, Winbond remains very bullish on DRAM outlook. It expects the DRAM price to stabilize in June despite ongoing price softness, as PC manufacturers gear up for "back-to-school" sales. It expects the sector to recover further in 4Q01.

• We remain conservative on prospects for the supply-demand situation for DRAM as die-size shrinkage progresses and yield rates mature. We see Winbond as having lost its technology leadership position to Powerchip (5346 'Li Jing') (ACCUMULATE) in current generation technology, and remain concerned about its ability to ramp up non-DRAM sales during the rest of the year.

LindaLiu@Primasia.com +886-[0]2-2547-8867