Weak Asian DRAM Prices To Help Clear Inventory Glut
By Dermot Doherty
Of DOW JONES NEWSWIRES
TAIPEI (Dow Jones)--The recent plunge in prices for dynamic random access memory chips has crimped earnings growth at many Asian chip makers, but those rock-bottom levels could also spur consumption and help clear out bloated inventories over coming months, semiconductor industry experts said.
"If you're a PC maker and you want to keep your revenue up, you have to upgrade your configuration," said Eric Tang, vice president at Powerchip Semiconductor Corp. (Q.PWC) in Taiwan. "We see that trend in the near future...(and) it will help consume the inventory PC makers have in their warehouses."
Indeed, there are already signs that PC makers may be taking advantage of the weakness in DRAM prices to install 128 megabytes of memory in their computer, as opposed to the usual 64 megabytes, thereby soaking up some of the current glut.
One local DRAM dealer in Taiwan, which is one of the largest spot markets in Asia and the world's third largest producer of semiconductors, said it has shipped 20%-30% more chips in November than in October.
A sales executive at the company attributed the jump to PC makers adding more memory, as well as a pick-up in demand from Europe and mainland China.
Prices Expected To Stabilize During First Quarter
The average spot price of a 64 megabit DRAM in Asia has fallen to just over US$3.00 - the break-even point for many players - as the much-anticipated strong demand for PCs failed to materialize during the second half of 2000 and companies dumped excess inventory into the spot market.
Semiconductor analysts agreed that PC makers will likely try to clear out some of their current glut of inventory by boosting the memory capacity of the boxes they sell.
"It may show up very soon," said Don Floyd, head of regional technology research at Credit Lyonnais Securities in Taipei. "DRAM cost per selling price has gone to very low levels and that implies more DRAM should go into the computer."
Floyd said he expects prices to stabilize during the first quarter of next year, albeit at low levels, with DRAM buyers likely to restock during the second quarter ahead of an expected shortage later in the year.
Demand for DRAM chips tends to be strongest during the fourth quarter as computer manufacturers ramp up PC production ahead of the year-end holiday sales period.
PC sales are expected to grow 19% this year, well off last year's 23%, according to International Data Corp |
