Powerchip to update business model

Powerchip Technology Corporation・s Board of Directors, on April 26, 2011, approved the motion to update the current business model.  Through the new DRAM production and marketing agreement with Elpida, Powerchip・s licensing and technology transfer fees will be significantly reduced and will also acquire Mobile DRAM technology and sales rights gratuitously.  Along with the rapid growth from wafer foundry and own brand products this new strategy will reduce the dependence on the commodity DRAM market and allow Powerchip to establish a long-term stable business model.

Following months of negotiations with Elpida, Powerchip・s Board of Directors on the 26th approved the major motion creating this new business model.   In the future Powerchip manufactured commodity DRAM products, as well as Powerchip・s rights to the portion of Rexchip・s output, will be completely sold back to Elpida to coordinate worldwide sales.  Powerchip will suspend its current relationships with its sales agents and in coordination with Elpida support Powerchip・s current commodity DRAM customers.

Powerchip indicated, after suspending commodity DRAM sales, Powerchip will immediately be able to save significant licensing and technology transfer fee expenditures each year.  At the same time avoiding patent litigation risks associated with the sales of own branded products.  Furthermore, Elpida has also agreed for Powerchip to acquire Mobile DRAM technology and sales rights gratuitously.  Combining self developed NAND technology, Powerchip is able to address the rapidly growing Mobile Application market, providing a complete memory product portfolio.

Regarding the impact on the company・s financials, Powerchip expressed, through the new business model, the future of Powerchip・s commodity DRAM business will go from following the market・s volatile highs and lows and instead display a less volatile pattern, resulting in long term stability in cash flow and profits and exhibiting a noticeable beneficial improvement.  As a result of Powerchip・s active development of its wafer foundry business, we expect to see results during the second half of the year where over 50% of Powerchip・s 12; wafer capacity will allocated to wafer foundry by the year end.  This growth will reduce the portion of commodity DRAM exposed to the higher risks of the business cycle and further avoid the huge capital expenditure burdens and contribute to Powerchip・s push towards diversified operations and a long term stable strategy.   

Spokesperson : Eric Tang(886-2-25170055)
Contact : Shannon Wu(886-3-5795000 ext.2009)