Micron expansion slowed by tester shortage
By Jack Robertson
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NEW YORK -- A DRAM testing logjam at Micron Technology Inc. has been
causing a severe curb on the U.S. memory firm's production rampup in
the current quarter, according to financial analyst reports based on
a recent closed-door company briefing.
The analysts also said Micron officials told them the firm's
targeted capital investment in 1998 may be scaled back to $700
million to $800 million from the originally projected $1 billion --
especially if the DRAM price blood-letting doesn't ease off next
year.
Dan Scovel, analyst with Fahnestock & Co., New York City, said
Micron officials told analysts that the firm had failed to keep up
its torrid DRAM production growth, dropping from a doubling of
output earlier this year to only a 10% growth this quarter. The drop
was not related to crashing DRAM market prices, but resulted from
lack of testing capacity to handle the production increases, Scovel
said. The testing logjam is expected to be broken next March when
Micron's new test center opens at Lehi, Utah, the first operation to
start work at Micron's huge new fab facility there.
The temporary lower Micron production ramp is good news for Asian
DRAM competitors, who unanimously blamed the U.S. firm's doubling of
output earlier this year as a major factor in over-saturating the
global market and fueling the pricing firestorm. The analysts,
however, said Micron expected to resume its steep production build
up in the rest of 1998, especially as the firm switches entirely to
quarter-micron wafer processing.
Micron officials were reported for the first time as putting the
company as No. 3 global DRAM producer ranked by revenue, with a 10%
world share. The analysts said Micron is already producing more
16-Mbit synchronous DRAMs than EDO versions and by the end of next
year SDRAMs will account for 100% of 16-Mbit output.
Robert Toomey of Piper Jaffray said Micron predicted a continued
growth in DRAM demand in 1998 of 50% to 90% over this year. "U.S.
inventories of DRAMs are very thin now, with customers working on an
estimated 2-to-3 days of inventory.
Steve Appleton, Micron chairman, told the closed-door session that
the wide-open chip expansion by Korean competitors may now be curbed
due to that country's banking crisis. He told the group that the
ability of Korean and some other Southeast Asian chip makers to
raise capital for new fabs has been reduced. He predicted the chip
industry would start to see fab delays and stretchout in equipping
new proeduction lines.
Analyst Toomey, however, said any impact from the Korean's cutting
back expansion plans would not show up for several years. "In the
interim, the Koreans and Taiwanese will continue to produce to
exceess, keeping pressure on spot prices in Asia, with spillover
effects into the U.S. market."
Raymond James & Associates, St. Petersburg, Fla., predicted that the
DRAM market glut would continue through next year, with no pricing
stability expected until 1999.
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