TAOYUAN, TAIWAN:Nanya Technology Corp, Taiwan's No.2 DRAM chipmaker, said on Thursday that growing PC demand would help drive its chip output higher in the third quarter after reporting narrower second-quarter losses.

Nanya is betting on demand for laptop PCs that require new-generation, power-efficient memory chips in coming months, however most analysts say Nanya is unlikely to turn profitable this year.

"The overall (DRAM) market is recovering and we will be doing well in the next few months," Nanya Tech vice-president Pai Pei-lin told reporters.

Pai said Nanya's bit growth -- growth of storage memory on chips -- would reach up to 20 percent in the third quarter from 2 percent in the second quarter.

Nanya booked a net loss of T$6.55 billion ($200 million) for April-June, narrower than first quarter's loss of T$10.5 billion as its average selling price (ASP) increased 31 percent in the second quarter from the first quarter.

Pai said Nanya planned to raise T$10 billion through a rights issue later this year or early next year, while the company left its 2009 capital spending forecast unchanged at T$13 billion.

The guidance came after the Taipei stock market closed on Thursday. Nanya shares ended down 4.8 percent, while Powerchip, Taiwan's top DRAM maker, dropped 5.2 percent, versus the main TAIEX's .TWII 0.3 percent rise.

Powerchip also said after the market closed that it would cancel unpaid leave for employees from Aug. 21, in a sign of the chip sector's recovery.

"New laptops are triggering demand for DDR3, for which there is a shortage now," said Pai, whose company sells the bulk of its chips to server and laptop PC makers that he declined to identify.

DDR3, faster and more power-efficient than mainstream DDR2 chips, would make up over 50 percent of Nanya's total production by 2010, up from 20 percent now, amid demand for faster computing speeds for multimedia applications.

In a July report, Daiwa Institute of Research said it expects 2Gb DDR3 DRAM to be the mainstream commodity DRAM by the first half of 2010. It said only companies with production capacity set up for advanced 50 namometer process technology would survive the battle for commodity DRAM next year.

However, Nanya was still several quarters behind sector leader Samsung Electronics in using advanced technology to produce memory chips, it said.

Nanya has said it would work closely with Micron Technology (MU.N: Quote, Profile, Research) and Inotera Memories (3474.TW: Quote, Profile, Research) to develop chips with higher margins and migrate to more advanced process technologies to reduce costs and boost efficiency.

Taiwan's government has allocated T$30 billion in state funds to help local dynamic random access memory (DRAM) chipmakers, who are struggling with their worst-ever industry downturn.

The government has said DRAM makers can apply for state funding by submitting proposals in three months. Inotera president Charles Kao told the same news conference that Inotera, Nanya and Micron would jointly submit a plan before the deadline.