Micron's situation should be looked in view of current situation in Korea. Micron is the lowset cost producer of DRAMs. Samsung and Hyundai, in hope of capturing the market share, kept on selling DRAMs at any price, irrespective of cost, the Korean banks kept on financing this insane pursuit in name of supporting the companies, considered National Pride. When Korean banks ran short of money, they turned to Japanese, European and US banks. Everyone was so impressed with Asian Tigers and greed to make more bucks, they loaned to Korean banks. The Dog and Pony show went on, losses kept on mounting in bilions, till even the billions ran out.
Now, the show is over. Korean banks have no money to lend for insane money losing businesses. Foreign banks are startled at the mess. The IMF is really bailing out the foreign banks, not Koreans. With this meltdown, credit facilities to Samsung and Hyundai have dried up. IMF will dictate and hopefully educate Koreans about not chasing the mirage of market share at any loss.
US computer manufacturers need DRAMs. Where is the reliable supplier? Micron is the only large US based supplier. Rumors are that things are in chaos and standstill at large Korean Companies. With just in time delivery systems, there is no stockpile of DRAMs with Compaqe od DELL. Would they want shutdown of their assembly lines due to lack of cheap Korean DRAMs?
I think the Spot prices for DRAMs should start moving up, if they have not done so. Let us watch the situation. MU stock price is indicating the logical consequence of Korean situation.
B.H. Barai |
