OT - DRAM
I have said a few times watch all these guys going into a
nightmare - voila:
001: SEMICON REPORT:DRAM Indus Needs Production Cuts Amid Losses
002: By Yun-Hee Kim
003: Of DOW JONES NEWSWIRES
004: HONG KONG (Dow Jones)--The latest earnings results from the world's top
005: memory-chip makers attest to how severely companies have been battered by the
006: recent collapse in chip prices.
007: Analysts warn that if chip makers don't slow their capacity expansion plans
008: further or shut down some facilities in the near term, hefty losses will mount,
009: forcing them to burn cash to sustain their operations.
010: Making things worse, chip prices aren't likely to recover soon as
011: manufacturers cope with weak seasonal demand in the first quarter and second
012: quarter. "There's been a general slowdown of production growth but not enough,"
013: said BNP Paribas analyst Peter Yu. "Economically speaking, it doesn't make
014: sense for companies to be producing" at current pricing levels.
015: The average spot price of the mainstream DRAM chip - a 512-megabit double
016: data rate two chip that runs at 667 megahertz - was US$1.07 each late Tuesday
017: on DRAMeXchange, Asia's biggest spot market for chips. The price has fallen
018: nearly 60% in the last six months.
019: Global DRAM revenue fell 19% to $6.5 billion in the fourth quarter from $7.97
020: billion in the third quarter as average selling prices plunged 31%, according
021: to El Segundo, Calif.-based market research firm iSuppli Corp. The decline in
022: market revenue resulted in an industrywide operating loss of nearly $3 billion
023: in the fourth quarter, the researcher said. "There's a lesson to be learned
024: from the fourth-quarter DRAM disaster: in this game of upping the production
025: ante, no supplier wins and the entire industry loses," said Nam Hyung Kim,
026: director and chief analyst at iSuppli. "Most suppliers' expected operating
027: profits for this year won't even support their current capital spending plans."
028: In recent weeks, chip makers from Hynix Semiconductor Inc. (000660.SE) of
029: South Korea to Elpida Memory Inc. (6665.TO) of Japan and Powerchip
030: Semiconductor Corp. (5346.OT) of Taiwan have reported steeper-than-expected
031: losses for the three months ended Dec. 31, and warned of weaker market
032: conditions ahead.
033: After Hynix posted a net loss of KRW465 billion - its biggest quarterly net
034: loss since the fourth quarter of 2003 - Senior Vice President for strategic
035: planning O.C. Kwon said Friday the DRAM industry will remain "challenging" and
036: weak prices may persist. Hynix also proceeded to cut its capital spending
037: budget this year by 25% to KRW3.6 trillion.
038: The company, the world's second-largest DRAM producer by revenue after
039: Samsung Electronics Co. (005930.SE), forecast DRAM shipments globally to rise
040: between 55% and 60% this year and that it would match the market's growth.
041: Powerchip, Taiwan's biggest DRAM maker by revenue, posted a record net loss
042: of NT$14.11 billion in its fourth quarter ended Dec. 31 and warned last week
043: that it expects to continue to post losses in the first quarter. It nearly
044: halved its 2008 capital spending plans to NT$35.1 billion from the NT$63.4
045: billion spent in 2007. But still, Powerchip said while it anticipated slower
046: output growth this year, it wasn't planning any production cuts.
047: Elpida, Japan's sole maker of DRAM chips, said last week its net loss for the
048: three months ended Dec. 31 was Y12.1 billion, much worse than the average
049: forecast of Y2.7 billion predicted by analysts. It also cut its full-year
050: capital spending budget to Y100 billion for the coming fiscal year from Y241
051: billion budgeted for this fiscal year ending March 2008.
052: That came after Samsung, the industry's No. 1 producer, saw profitability
053: from its chip business tumble to its lowest level since the chip industry's
054: downturn of 2001.
055: After posting a steep loss of EUR598 million for its first quarter ended Dec.
056: 31, Germany's Qimonda AG (QI) in late January cut its shipment forecast for
057: this year to 30% to 40%, from 50%. It also said it would accelerate reduction
058: of capacities on older generation 200-millimeter facilities and delay building
059: a new 300-millimeter chip plant in Singapore.
060: The newer generation 300-millimeter facilities can boost chip output by 30%
061: compared with 200-millimeter plants.
062: And in a sign that difficult times are forcing companies to look for ways to
063: survive, U.S. chip maker Micron Technology Inc. (MU) said in December it is
064: looking at partnership opportunities for its DRAM business amid rapid price
065: declines. "The issue of profitability is becoming even more critical in the
066: DRAM market as capital expenditure requirements grow," said iSuppli's Kim.
067: "Unfortunately the DRAM industry is headed for at least two more quarters of
068: major losses."
069: Jim Handy, an analyst at semiconductor market research firm Objective
070: Analysis, said he doesn't expect a full recovery in the DRAM market until 2009.
071: He said it isn't easy for DRAM makers to cut production but companies may
072: need to shut down facilities to survive. "If they idle any of their capacity
073: they still incur that cost, which now must be defrayed over a smaller number of
074: shipped units," said Handy. "The alternative is to shut down their least
075: efficient facilities, which would be their 200 millimeter fabs."
076: At least one chip maker in Asia - Taiwan's ProMOS Technologies Inc. (5387.OT)
077: - recently said it would suspend production following continued losses. ProMOS
078: spokesman Ben Tseng said last month the chip maker would suspend production of
079: DRAM chips at its two 12-inch chip plants in Taichung for around 10 days
080: between late January and early February.
081: The news led to a short rebound in DRAM prices on the spot market in
082: anticipation that industry oversupply would ease, but prices have since tumbled
083: again on weak demand.
084: Objective Analysis's Handy warned that DRAM prices, which are hovering at
085: production costs, haven't hit bottom yet and tough times may continue. "Since
086: prices are low, makers are motivated to reduce costs by shrinking their chips
087: and this will result in added capacity in existing facilities," he said.
088: Table Of Average Weekly Spot Prices
089: Feb 5 Jan 28 Jan 8 Dec 28
090: 32 Gb NAND $12.30 $12.22 $11.77 $12.06
091: 16 Gb NAND $5.81 $5.88 $5.68 $5.92
092: 8 Gb NAND $3.06 $3.07 $3.27 $3.33
093: 4 Gb NAND $2.22 $2.28 $2.67 $3.06
094: 1 Gb DDR2-667 $2.18 $2.21 $1.88 $1.89
095: 512 Mb DDR2-667 $1.07 $1.09 $0.92 $0.92
096: 512 Mb DDR2-533 $1.03 $1.04 $0.90 $0.90
097: Sources - Brokers, module makers, DRAMeXchange
098: -By Yun-Hee Kim, Dow Jones Newswires; 852-2832-2330; yun-hee.kim@dowjones.com
099: TALK BACK: We invite readers to send us comments on this or other financial
100: news topics. Please email us at TalkbackAsia@dowjones.com. Readers should
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103: along with your name; we reserve the right not to publish reader comments.
104: (END) Dow Jones Newswires
105: February 05, 2008 23:08 ET (04:08 GMT)
I hope this serious DRAM/NAND downturn goes on, which will
bode well for SPSN for compet. reasons, just because all
these guys will go away from FAB-exp. plans and they will
probably slow node migrations too.
BUGGI |
