11-13-98 Global Memory Chip Market Shows Growing Signs of Recovery
Is a long-awaited boom beginning in the chip market or is it just temporary rebound fueled by seasonal factors?
The continuing uptick in memory chip prices is posing a question that appears hard to answer at the moment.
Industry sources say that 64-megabit dynamic random access memory (DRAM) chips now sell for $9.89 to $10.77 each on the U.S. spot markets, an increase of over 30 percent from the $7.53-$8.14 level in May and June.
The prices of 16-megabit chips have also continued to rise since July. The spot market price of a 16M DRAM now stands at $2.77, up 80 percent from $1.49 in July.
Some market research firms say that the upswing in price is too strong to be seen as a temporary rebound.
Based on an analysis of chip price movements over several years, IC Insights, a research firm in Scottsdale, Arizona, said the global memory industry has already entered into a boom period. In August, the firm issued, ahead of others, an optimistic forecast that the industry had bottommed out in May and June.
IDC followed with a report released last month saying that recovery of the DRAM market started in the latter half of this year, although it is not strong enough to salvage the industry from a dismal 1998. Dataquest also forecast that 1999 will be a recovery year for the DRAM industry, with annual growth reaching as high as 30 percent.
But others remain more cautious, noting that past forecasts from these companies proved erroneous. For instance, Dataquest predicted last year that semiconductor revenue worldwide would grow a healthy 17 percent in 1998. But in reality, revenue growth for this year is negative.
The naysayers argue that the recent rise in the price curve is driven largely by such factors as volume orders from computer vendors in preparation for the Christmas season, production cuts by major chip suppliers and Micron Technology's anti-dumping suits against Taiwanese manufacturers.
''It is still too early to tell in what direction the chip market will move,'' said an executive of Samsung Electronics. ''It is almost impossible to predict what will happen in the semiconductor industry.''
Whether it heralds the start of a boom or just a temporary rebound, the increase in chip prices since June, especially the rapid increase from the beginning of this month, is providing a break to Korea's dejected chipmaking trio.
In their desperate efforts to put the brakes on falling chip prices, Korea's Big three chipmakers _ Samsung Electronics, Hyundai Electronics Industries and LG Semicon _ voluntarily halted their production lines for a week each month from June. But they scrapped the stoppage this month, interpreting the continuing rise in chip prices as a sign of a balance between demand and supply.
An industry watcher said the strong price showing on spot markets is being reflected in prices that chip manufacturers quote for PC vendors for direct supply.
''I hear that the Korean trio recently raised their supply prices for large PC vendors by 10 percent,'' he said.
Amid the price hike, the export volume of the three companies is also increasing rapidly. A Samsung official said his company's shipments abroad increased 18 percent from the previous month, expecting the higher chip prices to boost Samsung's profits from semiconductors to 700 billion won this year.
Despite the current favorable situation, the remaining two, Hyundai and LG, are unlikely to go in the black this year, although they will reduce their deficits drastically.
One market analyst said that had the recovery come earlier, the three would not have been the targets of the so-called ''big deals.''
The growing signs of recovery recently sparked a debate on the wisdom of the government's plan to merge the two firms. But government planners are determined to push ahead with their plan. |
