Micron: Memory Chip Prices Yet to Peak
bizreport.com
U.S. chip maker Micron Technology Inc. said on Tuesday prices of computer memory chips have yet to peak and gave an upbeat outlook for demand that contrasted with growing investor worries about the semiconductor sector.
by Jean Yoon and Kim Miyoung
Micron, the world's second-largest maker of standard computer memory chips, expected higher demand later this year on the back of a healthier personal computer market, Michael Sadler, vice president of worldwide sales, told Reuters.
He also said Micron was on course to start producing flash memory chips in bulk by the end of 2004. Flash chips, used in digital cameras and music players, have been big money spinners for South Korea's Samsung Electronics Co. Ltd. and Japan's Toshiba Corp., which together control some 90 percent of the market.
Asked where DRAM (dynamic random access memory) chip prices were heading, Sadler said: "We've not yet reached the strongest point yet."
"The August to November period is when the demand is the strongest seasonally on back-to-school PC demand," he said in an interview.
His comments coincided with fresh investor worries that the highly cyclical semiconductor industry has peaked because new production lines will lead to an oversupply of chips and other components.
"Investors fear corporate earnings estimates are still too optimistic," said Song In-ho, a fund manager at Kyobo Investment Trust and Management.
"They are concerned about possible oversupply and weakness in demand amid the United States raising interest rates and China preparing for a slowdown in its fast growing economy."
MERRILL UPBEAT ON ASIAN DRAM MAKERS
Merrill Lynch downgraded the global semiconductor sector to "underweight" from "overweight," on Monday, saying there was little prospect the shares would rise from current levels. It also cut its recommendation for Micron to "hold" from "buy," helping to push down Micron shares 3.12 percent.
But Merrill maintained a "buy" rating on three Asian DRAM makers -- Samsung, Hynix Semiconductor Inc. and Taiwan's top memory chip maker, Powerchip Semiconductor Corp., saying it did not expect any significant growth in supplies of DRAM and the main type of flash chips through 2005.
"These factors will eventually cause minimal DRAM price erosion through 2004-05," it said in a summary of its recent research on Tuesday.
The price of 256-megabit DDR DRAM chips, the industry standard, stood at $4.70 per unit on Tuesday, down from $5.29 at the end of March, according to microchip broker DRAMexchange.com. But prices are up from $3.70 at the start of this year and Micron is not alone in forecasting a fresh rise.
Powerchip said late last month it saw DRAM prices rising in the third quarter and then remaining steady until the second half of next year, because strong corporate PC demand was likely to give chip prices a fresh boost.
Sadler said he expected the number of PCs sold this year to rise 10-13 percent as a replacement cycle kicked in and the global economy strengthened.
He said the Boise, Idaho based firm was on track for volume production of flash memory chips at the end of 2004 and was looking for a partner to boost output of a type of flash known as NAND.
"There's not a lot of room, given our current capacity constraint, to increase the NAND flash production dramatically. So in order to possibly do that, we are talking with various other potential partners about ways we might be able to collaborate."
Sales of flash memory chips remain strong, but profits are slipping as Samsung Electronics and Toshiba slash prices to stoke demand and undermine new rivals such as Micron.
Micron expects NAND flash memory to account for less than 5 percent of its production capacity by the end of the year, with DRAM taking up 80 percent. The remainder would comprise products such as complementary metal oxide semiconductors (CMOS) used in cameras. |
