Asia DRAM Report: Hyundai Rumors, Restocking Buoy Prices
By Dermot Doherty
OF DOW JONES NEWSWIRES
TAIPEI (Dow Jones)--Confusion swept through the market for dynamic random access memory (DRAM) chips over the past week as spot prices staged a surprise rally off recent historic lows.
The spot price of a 64MB DRAM chip rebounded to US$2.20, compared with US$2.00 a week ago, while prices for 128MB DRAMs rose to US$4.20 from US$3.95 during the same period.
Dealers grasped for explanations for the recovery, with some pointing to restocking of depleted inventories by some original equipment manufacturers (OEM) of PCs and others noting speculation that financial woes at Korean chip giant Hyundai Electronics Industries Co. (Q.HEL) were intensifying.
"A lot of it has been about expectations," said one executive at a DRAM dealership in Taipei.
But although the latter could herald a drastic cut in supply into the spot market and a spike in DRAM pricing, industry experts greeted the rumors with skepticism.
"There are a lot of expectations that Hyundai will go under or shut down plants, but the only thing generating cash for them right now is chips," said Sam Hahn, semiconductor analyst at HSBC Securities in Seoul. "They're on a daily cash flow strain, so they need to maintain those chip sales."
The Korean chip giant itself on Monday denied the cuts in DRAM production, following a report by Electronics Buyers' News Web site that vice president Fahard Tabrizi said the company is considering cuts in DRAM output.
And over the weekend, creditor banks agreed to give Hyundai, which is set to change its name to Hynix Semiconductor Inc. later this month, and two other units of the ailing conglomerate an emergency financial aid package.
HSBC's Hahn believes the recent turnaround in spot prices was sentiment-driven given Hyundai's troubles - not based on a pick-up in fundamentals. DRAM prices, he said, could slide again, perhaps falling to as low as US$1.50.
"If there were signs of fundamentals improving, Intel Corp (Singapore: INTC.SI - news). wouldn't be coming out with revenue warnings," he noted.
Some dealers also said Japanese semiconductor makers could reduce their stockpiles of DRAM chips before they close their books for the fiscal year at the end of March, further pressuring spot prices.
While inventory in DRAM channels and at OEMs has fallen to low levels, it remains on the high side at chipmakers themselves, they said.
Not all semiconductor analysts were so downbeat, though, with some arguing speculation about Hyundai's financial problems belied a pick-up in demand over the past week.
Don Floyd, head of regional technology research at CLSA Emerging Markets in Taipei, pointed to greater activity in the spot market, PC makers restocking depleted inventories and a jump in contract demand over the past week as positive signs.
"Some of the guys in the channels don't have inventory and you're seeing healthy motherboard shipments out of Taiwan," Floyd said. "So we are seeing pockets of strength."
While demand in the U.S. remains weak, Taiwanese companies also have exposure to growing PC markets such as mainland China, Southeast Asia and Europe, he noted.
Moreover, many players in the DRAM market are betting that spot prices have fallen to, or are close to, their bottom after having plunged during the second on worse-than-expected PC demand.
"Everybody's playing a guessing game," Floyd said. "If you believe that prices can't go any lower, why not buy now?" |
