Toshiba bumps up profit forecast on rising chip prices, China demand

By: | Published: September 28, 2016 3:28 PM

Japan's Toshiba Corp expects to post a bigger first-half profit than it previously forecast, boosted by rising flash memory chip prices and strong chip demand from Chinese smartphone manufacturers.

A Toshiba spokesman said the upward revision mainly reflects growing demand from Chinese smartphone makers for its NAND memory chips with larger storage capacity as these manufacturers are upgrading features of their products. (Reuters)A Toshiba spokesman said the upward revision mainly reflects growing demand from Chinese smartphone makers for its NAND memory chips with larger storage capacity as these manufacturers are upgrading features of their products. (Reuters)

Japan’s Toshiba Corp expects to post a bigger first-half profit than it previously forecast, boosted by rising flash memory chip prices and strong chip demand from Chinese smartphone manufacturers.

The recovery in the global memory chip market is a much-needed boon to Toshiba, as the sprawling conglomerate is trying to turn itself into a leaner company focusing on NAND chips and nuclear energy following a $1.3 billion accounting scandal.

Toshiba said on Wednesday it now expects an operating profit of 70 billion yen ($696.4 million) for the April-September period, above an average forecast of 58.7 billion yen by five analysts. It had previously forecast a 30 billion yen profit.

A Toshiba spokesman said the upward revision mainly reflects growing demand from Chinese smartphone makers for its NAND memory chips with larger storage capacity as these manufacturers are upgrading features of their products.

Demand for high-capacity flash memory chips from Chinese phone makers as well as growing flash memory use for enterprise server applications, have helped the NAND flash memory market bottom out.

According to researcher TrendForce, combined global revenue of branded NAND flash suppliers increased 3.4 percent sequentially in April-June, signalling the end of revenue decline that persisted in the past two consecutive quarters.

“Toshiba is bound to benefit from strong demand from Chinese smartphone makers,” said Satoru Oyama, senior principal analyst at researcher IHS.

Toshiba, with a near 30 percent share of the global NAND flash memory market, can supply chips to Chinese smartphone makers wary about being reliant on industry leader Samsung Electronics Co.

Yukihiko Shimada, analyst at SMBC Nikko Securities Inc, also noted that Toshiba’s advanced flash memory with three-dimensional (3D) stacked cell structure could be introduced to a high-end model of Apple Inc’s iPhone 7 – a move that could further boost the company’s presence in the market.

Toshiba said it has also been seeing strong demand for hard disk drives for personal computers and game consoles. Its results have been pushed up as the yen has traded weaker than its 100 yen per dollar assumption. A weaker yen boosts revenue and profits booked overseas when repatriated back home.

The company said it would announce its full-year forecast as soon as possible – it may revise it after considering first-half results and the outlook for foreign exchange and other market conditions in the second half.

Toshiba previously forecast a full-year operating profit of 120 billion yen, a turnaround from the 708.74 billion yen loss the previous year.

Shares of Toshiba finished up 4.9 percent on Wednesday, the highest in about 11 months.

($1 = 100.5200 yen)

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