December 10, 2007 – In an interview with Japan’s Nikkei daily, Advantest president Toshi Maruyama admits the company misjudged the timing of the DRAM price drought, but is optimistic that backend tool orders will pick up by next summer — as long as midsize manufacturers get back in the game, and the US subprime mortgage debacle doesn’t sour consumer spending habits.
Advantest’s 1H07 sales were about 25B yen (US $~224M) below expectations, and group operating profit is expected to fall 17% from a year ago to ~47B yen ($421M). “Our biggest mistake was not realizing that the decline in DRAM prices would last so long,” Maruyama-san told the Nikkei, explaining that the company had thought DRAM makers “would rush to make strategic investments to survive, and Taiwanese makers would use the money earned through memory sales for equipment investment.” Slumping DRAM ASPs derailed that outcome though; also, demand for LCD drivers hasn’t been as strong as hoped.
Taiwanese makers’ spending is still “weak,” and is “far from the rapid increase we would like to see,” but it’s better than it was in the September quarter, Maruyama-san noted. The company sees improving orders by the June quarter thanks to “strategic DRAM investments.” He cryptically referenced three unnamed big-spenders — “a Japanese firm and South Korean companies, as well as a test house related to the three” — but noted that overall orders won’t recover significantly unless Taiwanese and other midsize manufacturers step up their equipment investments.
Asked about the impact of the US subprime mortgage fallout, Maruyama-san told the Nikkei that “there have been no concrete effects,” but because chips are now used in a wider range of consumer devices, there is concern that this may begin to affect consumer spending habits. He also blamed a strong yen, which “toughens the conditions under which we engage in price-cutting competition with our rivals.”
Referring to the company’s current war chest (150B yen/$1.34B), Maruyama-san noted that the test sector tends to decline faster than the chip manufacturing sector, so the company needs that cushion of funds for activities including R&D and M&A.