LG shutdown is affecting DRAM prices
I know we have all been reading all these articles and they seem to be ho-hum but to me it continues to point to the fact that inspite
of anyones increased output plans, the LG output taken out of the supply line is having some price strengthening effects. One LG person I talked to indicated it would be the second half of Feb, before any
real effects would be seen and would take some time once the Fabs started up again before parts would start shipping again.(I assume that means most of the in process wafers would have to be scrapped and start over. someone who is knowledgeable here please comment about when you stop a FAB what is the impact?Are we talking 90-120 days??)
It just seems to me that if DRAM prices continue to be firm and any extra product created is used replace the LG loss of product, then
MU has a good chance of trending up or at least a better chance of holding its price.(any comments?)I had to buy some shares on Friday
realizing a risk the stock may not have hit bottom? I thought calls were too risky, but if I am wrong, I will wait it out with the shares.
Goal, 5 points.
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A service of Semiconductor Business News, CMP Media Inc.
Story posted 3:45 p.m./12:45 p.m., PST, 2/5/99
LG shutdown is affecting DRAM prices
By Jack Robertson
WASHINGTON -- OEMs, already facing an uptick in memory-chip
prices, could see conditions worsen because of the shutdown of LG
Semicon's DRAM plants in Korea.
The loss of production from LG, the world's sixth-largest DRAM producer,
has more than offset a surge in output from Micron Technology Inc. and
Samsung Electronics Co. Ltd., industry watchers said.
As a walkout by LG workers continues, a company spokesman in Seoul
said the company was working to resolve workers' demands for future job
security. Workers at LG, which is being acquired by rival Hyundai
Electronics Industries Co. Ltd., are demanding that their jobs be guaranteed
for seven years (see Feb. 4 story).
Another major issue yet to be resolved is the price Hyundai will pay for LG.
Hyundai had offered about $2 billion initially--plus the assumption of nearly
$4 billion in LG debt--while LG had demanded $3.6 billion. The two sides
are said to be nearing an agreement.
The loss of LG's output will be felt in the DRAM market long after the strike
is settled, said Charles Glavin Sr., an analyst with CS First Boston
Securities in San Francisco. "You'll lose much more than just two weeks'
production," he said. "All wafers in progress at the time of the shutdown will
be lost. In addition, there's an extended period to requalify and bring [fab]
lines back up to high productivity levels."
Had LG's fabs been cranking out chips as planned, prices might well have
been cut due to production ramp-ups at Micron and Samsung, Glavin said.
Micron's DRAM output, measured in bits, will jump 25% in its fiscal quarter
that ends this month, compared with the previous quarter, the company has
said. At Samsung, DRAM output at the end of 1998 was running 40%
above last summer's levels, a company spokeswoman said.
The increased production hasn't affected pricing in the spot market or on
OEM contracts, according to sources.
Paul Myers, DRAM commodity specialist with the American IC Exchange,
an independent distributor in Aliso Viejo, Calif., said spot-market prices
have risen more than $1 on mainline 64-megabit chips since mid-December.
Spot prices now range from $10.50 to $11, he said.
The spread between spot and OEM prices also reportedly is narrowing
significantly, with contract rates nearing par with the commodity market.
Glavin warned that the biggest market impact of the LG strike may be
psychological. "It sends many signals to the market that DRAM supply may
become tighter sooner than anyone expected," he said. |
