DRAM - Counter argument, temp shutdowns have not affected inventory glut much. Look for more 16Meg factory closures before problem resolves.
A service of Semiconductor Business News, CMP Media Inc.
Story posted at 4:45 p.m. EDT/1:45 p.m., PDT, 8/7/98
DRAM market unfazed by shutdowns
By Jack Robertson Electronic Buyers' News
WASHINGTON -- Most of Japan's chip makers are joining their
South Korean rivals in shutting down their DRAM fabs for one to
two weeks of summer vacation, but the reduced output has had an
uncertain impact so far on market prices.
Despite the fact that the likes of Fujitsu Ltd., Hitachi Ltd., NEC
Corp., and Toshiba Corp. are in the midst of their annual hiatus, spot
prices remain a mixed bag, with most DRAM types halting their slide
and some increasing slightly.
Indeed, the sagging DRAM market took virtually no notice when two
South Korean companies-Samsung Electronics Co. Ltd. and
Hyundai Electronics Industries Co. Ltd.-closed their lines for up to
two weeks in June. More recently, Hyundai closed its lines for a
second time at the end of July, while major Japanese memory makers
are expected to close their DRAM fabs for six to 10 days this month.
The American IC Exchange (AICE), a memory chip broker based in
Aliso Viejo, Calif., said most 64-Mbit DRAM versions last week
were selling at $7.45 to $9.52, as 16-Mbit chips continued to bump
along between $1.37 and $2.21.
Not every DRAM manufacturer plans to halt production. Micron
Technology Inc. is continuing to run DRAM lines at full tilt, and even
Samsung and Hyundai have said they will keep their new U.S. fabs
going without interruption.
With the pipeline still clogged with DRAM chips, many analysts
aren't surprised that the spot market hasn't reacted much. Brokers
also said slackening demand from PC and other OEM customers has
stifled activity in the spot market, regardless of Asian fab closings.
OEM contract prices covering future DRAM deliveries over many
months have been only minimally affected by the temporary dip in
output from the shutdowns, they added. "We really haven't seen
anything result [from the shutdowns]," said Jennifer Bender,
purchasing manager at AICE. "It's not enough of a cutback to
influence pricing."
Byron Walker, a chip analyst at BT Alex. Brown Inc., New York,
concurred. "Recent evidence indicates that this month's production
cuts are not enough to sustain firm [DRAM] pricing," he said.
Even some chip makers doubt that their closures will do much to
ease the oversupply. Bob Brown, president of Toshiba America
Electronic Components Inc., Irvine, Calif., said he doesn't think his
company's 10-day shutdown will have much impact on the market.
Other chip executives suspect that any further shutdowns will likely
affect aging 16-Mbit DRAMs, which most companies are trying to
work down as they rapidly shift to higher-margin 64-Mbit devices.
Many 16-Mbit chips are run on older 6- and 8-inch-wafer,
0.5-micron-generation fabs that have been fully depreciated and are
better able to absorb production stoppages, they said.
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