Memory prices will remain low and go lower. Expect PC prices to continue their rapid decline.....................
A service of Semiconductor Business News, CMP Media Inc.
Story posted at 3 p.m.EST/noon PST, 1/8/98
DRAM price plunge will continue
with Korean crisis and "cost holiday"
By J. Robert Lineback
PEBBLE BEACH, Calif.--South Korea's monetary meltdown will most
likely fuel more steep cuts in DRAM and memory pricing in early 1998
because Korean suppliers now have a "cost holiday" resulting from currency
devaluations against the U.S. dollar, said analysts during the annual Industry
Strategy Symposium here this week.
"About 55% of the DRAM manufacturing costs [in Korea] are won
sensitive," said analyst Clark J. Fuhs, director of Dataquest's semiconductor
equipment, manufacturing and materials program, based in San Jose. "The
result is they can cut prices and still maintain a 'profit margin,'" he added,
referring to the ability to skirt anti-dumping measures in the U.S. and
European markets.
That will be bad news for DRAM suppliers based outside of Korea, which
have struggled with sharp price drops in 1996 and 1997. There is now a
strong possibility that average selling prices for memories will drop an
unprecedented third year in a row, said analyst Bill McClean, president of
IC Insights Inc. of Scottsdale, Ariz. He told executives attending the
conference that too much production capacity sent average DRAM prices
down 60% in 1997 after a 65% drop in 1996.
Nearly all financial and market analysts speaking at the conference said they
now anticipate the DRAM market--now totaling about $20-22 billion--to
remain in an oversupply condition until the first quarter of 1999. If so,
worldwide DRAM revenues will be eroded and total semiconductor sales
will most likely fall short of high-end growth estimates in the 17-20% range
in 1998. All of those forecasts are based on a recovery in DRAM pricing.
"For every $1 in the average selling price of DRAMs, total semiconductor
revenues will rise or fall by 4 percentage points," McClean noted at the
annual conference, hosted by the Semiconductor Equipment and Materials
International (SEMI) trade group.
Dataquest's Fuhs said Korean suppliers will be motivated to cut memory
prices because they desperately need U.S. dollars to pay off loans and they
want to maintain market share during the financial crisis. "The profitability of
non-Korean suppliers will suffer," he added.
But with the loss of profits in 1998, stalwart memory merchants might finally
see light at the end of the DRAM recession tunnel. Industry executives and
market observers believe a couple of major DRAM suppliers will opt to
exist the market in 1998, if no recovery becomes apparent this year. "We
must have capacity exist the market in for any kind of recovery," Fuhs said. |
