Walton Advanced Engineering, which provides packaging and testing services for memory chips, expects its third-quarter revenues to be flat or rise slightly on quarter. The firm indicated that rising demand for niche-market DRAM and mobile DRAM chips will help offset a fall in orders for standard DRAM products.

The reported supply cutback in the upstream industry will have little impact on Walton's business in the third quarter, according to company president Yu Hong-chi. Meanwhile, Walton has gradually shifted its focus from standard DRAM to memory products targeted at non-PC applications particularly mobile consumer devices, said Yu.

Elpida Memory, reportedly among Walton's major DRAM customers, has moved to scale down production at its Hiroshima plant, and also production at its Taiwan-based subsidiary Rexchip Electronics, a recent report cited unnamed industry sources as saying. The reportedly cutback targets mainly production for commodity DRAM chips.

Yu noted he cannot comment on customers' orders and strategy, but believes that orders for niche-market DRAM and mobile DRAM memory will be a key driver for its revenue growth in the second half of 2012 and help mitigate the impact of falling orders for PC DRAM products.

In the first quarter of 2012, Walton saw sales generated from orders for niche-market DRAM and mobile DRAM chips account for 53% of company revenues, Yu revealed. The proportion will stay high at above 50% in the third quarter, and likely top 60% in the fourth quarter, Yu said.

In addition, Walton is looking to build new capacity to meet growing demand for non-PC DRAM memory, according to Yu. The company expects to boost its monthly capacity for niche-market DRAM and mobile DRAM memory to about 90 million units at the end of 2012, up from the current 80 million.

Walton has set a higher capex target for 2012 of NT$2 billion (US$66.8 million), a doubling from its previously-set NT$1 billion, said Yu.

Walton announced revenues of NT$2.19 billion for the second quarter of 2012, up 19% on quarter, with gross margin rising 3pp sequentially to 14%. However, due to uncollected accounts receivable from Elpida, Walton suffered net losses of NT$487 million in the quarter. Net losses amounted to NT$352 million in the first half of 2012.

If Walton were able to collect accounts receivable from Elpida, the backend firm would have reported net profits of about NT$374 million for the first half of 2012. Walton generated net profits of NT$466 million in the same period of 2011.