Memory-chip makers Nanya Technology Corp. (2408.TW) and Inotera Memories Inc. (3474.TW) continued to incur losses in the second quarter as global chip prices remained at low levels, but both Taiwanese companies said they expect market conditions to improve in the current quarter.

Nanya, Taiwan's largest maker of dynamic random access memory chips by revenue, said its net loss for the three months ended June 30 was NT$6.55 billion, narrower than its net loss of NT$7.29 billion a year earlier.

Its second-quarter revenue fell 15.1% to NT$8.09 billion from NT$9.53 billion a year earlier.

Nanya's second-quarter net loss was narrower than the average NT$7.63 billion net loss forecast by seven analysts polled earlier by Dow Jones Newswires, and was its ninth consecutive quarterly loss.

Nanya's second-quarter gross margin was negative 52%, widening from negative 36% a year earlier but narrowing from negative 113% in the first quarter.

"Demand is improving month by month, and chip prices will continue rising through at least October," Nanya spokesman Pei Lin Pai said before the company's investors' conference.

Demand for double-data-rate-three, or DDR3, chips that are faster and more power-efficient is especially strong as notebook computer makers are introducing more ultra-low voltage products, Pai said.

Currently, DDR3 chips account for 20% of Nanya's production, and more than 20% of Inotera's production, he said.

Nanya plans to raise early-August contract chip prices by 10%-20% from late-July prices, Pai said, adding its bit shipments will likely rise 10%-20% in the third quarter from the April-June period.

The company's second-quarter bit shipments rose 2% from the first quarter, Pai said.

Separately, Inotera Memories, a memory-chip joint venture between Nanya and U.S.-based Micron Technology Inc. (MU), said it also expects losses to narrow further in the current quarter due to recovering demand.

Inotera said last month its second-quarter net loss was NT$4.11 billion, widening from a net loss NT$3.27 billion a year earlier. Its revenue fell 23% to NT$7.46 billion from NT$9.70 billion a year earlier.

Inotera priced its 64 million Global Depositary Receipts at US$4.8757 each July 31 and raised about US$310 million.

Inotera Executive Vice President Michael Sadler declined to disclose whether Intel Corp. was one of the subscribers of the GDRs, the Commercial Times reported last month.

"But at this point, there's no strategic relationship between Inotera and Intel," Sadler said.

Inotera President Charles Kau said he expects the company's bit shipments of memory chips to rise 30% in the third quarter from the second quarter, weaker than the sequential rise of 41% it posted in the second quarter as the company is migrating its production technology to the more advanced 50-nanometer technology from 70-nanometer technology.

Inotera expects its bit shipments for 2009 to fall 10% from 2008. In 2008, Inotera's bit shipments rose 53% from the previous year.

From the first quarter of 2010, Inotera will mainly produce 2-gigabit DDR3 chips using 50-nanometer technology, which yields more chips, before progressing to the even more advanced 40-nanometer production technology in 2011, which will significantly lower the company's unit production cost, Kau said.

"With sufficient funds and as the first companies to make chips using 50-nanometer technology in Taiwan, (Nanya and Inotera) are the most competitive DRAM makers on the island," said Felix Hsu, an analyst at Masterlink Securities Corp.

If chip prices continue to rise at the current pace or even faster, Nanya and Inotera may return to profit as soon as the first quarter of 2010, Hsu said.

Nanya and Inotera reiterated they will make a joint application for investment from the Taiwan government, but both companies declined to provide a timeframe or disclose further details.

The Taiwan government said late last month that it plans to invest in one more local DRAM company apart from government-funded Taiwan Memory Co., to make the island's DRAM sector more competitive.

-By Jessie Ho and Lorraine Luk, Dow Jones Newswires; 88622 502-2557; jessie.ho@dowjones.com