Memory prices soar
Last modified: April 14, 2004, 5:51 AM PDT
By Reuters
The price of memory chips is rising at its fastest rate in more than four years due to an unexpected global shortage.
The price rise of more than 70 percent this year is in sharp contrast to analysts' expectations at the end of 2003, when they forecast prices would slide as new production technology increased supply.
As a result, profits for chipmakers are increasing, and their share prices are surging as analysts and traders now predict that memory prices will stay strong this year.
The price rise is related to at least two factors: Some manufacturers have run into problems using the latest production technology, and many have switched from making basic memory to flash memory for camera phones and digital cameras.
The trend was underscored in two announcements in Japan this week. On Tuesday, Toshiba said it had raised its planned investment for a new flash memory plant by 35 percent to meet growing demand.
And on Wednesday, Renasas Technology, the world's third-largest chip maker, said it aimed to raise its flash production sixfold in two years. Renasas is a joint venture between Hitachi and Mitsubishi Electric.
"On the one hand, technology upgrades are running into problems. And on the other hand, manufacturers are switching capacity to flash, legacy memory and other memory products,'' said Eric Tang, spokesman for Powerchip Semiconductor.
Powerchip is Taiwan's largest maker of DRAM (dynamic random access memory) chips, the most common type of memory. Personal computers consume about 80 percent of DRAM chips.
Fastest rise since quake
The price of a 256-megabit DDR DRAM chip, the industry standard, stands at $6.53, according to microchip broker DRAMexchange.com. That compares with $3.70 at the start of this year. At the end of last year, analysts had been expecting prices to fall to as low as $3.30.
The price rise is the fastest since the aftermath of a September 1999 earthquake in Taiwan, analysts said.
"DRAM prices are likely to remain firm this year and the following year,'' said Yu Chang-eyun, analyst at BNP Paribas Peregrine in Seoul. "We expect the market to be driven from the second half on PC replacement demand from the corporate side. We are looking at an 18 percent rise in global PC demand this year.'' Demand for flash memory--which, unlike DRAM, retains its contents when power is switched off--is so strong that chipmakers are switching a significant portion of their DRAM capacity to flash.
Analysts said Samsung Electronics, the world's biggest memory chipmaker, has slashed DRAM output to 60 percent of its total memory production from above 80 percent two years ago to lift its flash chip component to more than 35 percent.
Flash chips allow mobile phones and handheld computers to switch on instantly without "booting up,'' as in the case of a PC using DRAM.
Further tightening supply, some chipmakers have been struggling to adopt technology to shrink chip circuitry from 130 nanometers to 110 nanometers. The technology reduces chip sizes and boosts production efficiency as more chips can be manufactured per silicon wafer. But the process is complicated and difficult to perfect.
"We believe the tight supply situation will continue for the time being on delays by rivals in a move to shrink circuitry" to 110 nanometers, said a semiconductor trader at Samsung.
Samsung, which has 28 percent of the world's DRAM market, already produces more than 95 percent of its 256-megabit DRAM chips using the 110-nanometer process. |
