#2: More price problems (scroll down, also note Rambus references)...
Samsung gives in to DRAM drop.
(Samsung Electronics adjusts 16-Mbit DRAM production) (Company Business and Marketing)
Electronic Engineering Times, June 3, 1996 n904 p1(2)
Author
Carroll, Mark; Lammers, David
Summary
Samsung Electronics, responding to changing market conditions, announced that it will reduce the amount of production for 16-Mbit DRAM by up to 2 million pieces per month. The move is a response to spot market exigencies, which have seen the price of 16-Mbit DRAM plunge into the $10 range and currently place the value of a megabyte of DRAM memory at about $5. Samsung will immediately trim its monthly production to 12 million units. Two other South Korean producers, meanwhile, announced expansion and investment plans. LG Semicon will expand its facilities for manufacturing 64-Mbit DRAM in several 0.35-micron product lines. Hyundai Electronics will counter by increasing its rate of production of 16-Mbit DRAM from a current level of 8 million to 14 million by the end of 1996. Despite the current pricing pressure, industry analysts are predicting a 19% increase in PC sales for 1996, with a corresponding surge in DRAM requirements.
Full Text
Yokkaichi, Japan - DRAM prices took another sharp slide last week, prompting Samsung Electronics to announce that it will cut 16-Mbit production by 2 million units per month. In Tokyo, sources said the 16-Mbit spot market was headed for sub-$10 territory, which would value a megabyte of DRAM memory at $5.
Samsung, which has been running its factories around the clock, will shut down for two days a month and give its workers additional summer holidays in order to reduce monthly output to 12 million units, according to a spokesman.
However, the other two major South Korean producers vowed to increase production of 16-Mbit DRAMs. Hyundai Electronics said it will boost monthly output from 8 million to 14 million units by year's end, and LG Semicon pledged to boost capital investments for 0.35-micron lines capable of 64-Mbit DRAM production.
Gyrating market
All the major DRAM makers were mulling their options last week as the spot markets in Japan, Taiwan and the United States underwent unprecedented gyrations, dropping the 16-Mbit tag to $12 and lower. DRAM prices have been under heavy pressure all year, but the slide was particularly acute in May.
Against this backdrop, Toshiba Corp. last Thursday opened a mammoth memory fab here, Yokkaichi II, capable of 30,000 wafers per month at 0.35-micron process rules for 64-Mbit and shrink-16-Mbit DRAM production.
"What the big U.S. PC makers have been telling us is that they will work off their DRAM inventories by mid-summer," said Koichi Suzuki, in charge of Toshiba's semiconductor operations. "But the answer to whether the DRAM market will bounce back must come from the PC makers' ability to offer new products."
Peter Wolff, electronics analyst at Barings Securities, said a DRAM salesman based in the United States told him that a by-4 configured 16-Mbit DRAM sold for $10.50 on the U.S. spot market late last week, a 10 percent drop from a few days earlier. Wolff said he believes Hitachi Ltd. will cut back production in response, although Hitachi publicly said it has no such plans. "Ultimately, everyone will have to cut production," said Wolff, "but the question is, when?"
An executive at a major semiconductor-equipment company said NEC Corp. has signaled it may not spend the entire <> billion it originally planned for fiscal 1996 capital expenditures, citing changes in "product mix." "The investment plans differ, company by company," the source said. "[But] overall, our business will be down 10 to 20 percent or more. We are pretty worried."
Matt Cleary, semiconductor analyst for the Hong Kong brokerage HG Asia, said Hyundai is currently selling 16-Mbit DRAMs for $11 on the Taiwan spot market. Another source who tracks the Taiwan spot market added that "1-meg-by-4 4-Mbit parts are in a hopeless situation because of the drop in 16-Mbit parts. I see the price for the 16-Mbit falling all the way to $10."
Wolff at Baring Securities said contract prices, including those for U.S. delivery, have been forced to matchspot-market prices. "If the spot price is $12, then the contract price is fast becoming $12," he said.
Despite the gloom, Akira Minamikawa, semiconductor ana-lyst at International Data Corp. Japan, said IDC recently staged a seminar in Seoul where attendees from LG Semicon and Hyundai "were very optimistic. They want to increase their market share, and they worry that if they cut their capital spending they will eventually lose market share."
However, Minamikawa predicted that the South Korean Ministry of Trade and Industry will respond to Samsung's decision to scale back production by instructing Hyundai and LG Semicon to moderate their production increases. He speculated that in Japan, MITI will keep a low profile and the major producers "will talk among themselves and decide to cut back on production. Otherwise, the price will continue to drop and there will be no profits."
Minamikawa said the most efficient producers can make a 16-Mbit DRAM for $12 or less, and he believes the contract price may stabilize in the $15 range in the third quarter.
Not growing
Even with PC sales picking up to what IDC believes will result in a 19 percent annual rise, per-system memory usage is not growing as much as expected. Though IDC predicted that figure would rise from 15 Mbytes last year to 23 Mbytes in 1996, the actual total may be around 20 Mbytes. That 3-Mbyte shortfall, combined with a huge inventory of DRAMs, spells a continuing oversupply.
Hardest hit are fast-page-mode DRAMs, said Hajime Sasaki, executive vice president of NEC. "Frankly speaking, the fast-page-mode market is shrinking, but in that area we still see a serious oversupply."
Sasaki said that by year's end, 30 percent of NEC's DRAM production will be synchronous parts and by March 31, the end of the fiscal year, the SDRAM total will be 50 percent. Rambus DRAMs will account for another 10 percent, Sasaki said, particularly since NEC is supplying Nintendo Ltd. with two 18-Mbit RDRAMs for each of its new Ultra 64 game machines.
Though SDRAMs now carry a 20 percent price premium over 16-Mbit extended-data-out DRAMs, sources at Taiwan motherboard makers said both NEC and Samsung have assured them of price parity by the end of the second quarter. "Price is a definite consideration on whether SDRAM will make it to the market," said Al Su, marketing manager for Holco Enterprises. "Our customers will not pay a premium, since the performance gain is minimal. Price equivalency with the EDO DRAM is essential."
"Using EDO DRAM with the less expensive SRAMs for cache is not only cheap, more importantly, it is dependable;why switch to an unknown?" asked Susan Shu, marketing manager for Microstar International. She noted that "the $3 extra cost for the DIMM sockets makes SDRAM a problem to begin with."
In fact, with SRAMs so cheap, few companies are shipping cacheless systems anymore. Until the system bus speeds up to a point where EDO DRAMs cannot keep up, the EDO-plus-SRAM combo will dominate, said Jim Feldham, president of Semico Research (Phoenix). "Obviously, NEC is not going to move half of its production to SDRAM as long as it has a 20 percent premium," he said.
Product-planning managers at several companies said they expect it will be the second half of 1997 before SDRAMs hit mass-production levels for the desktop market. The collapse of the EDO price provides an incentive to move to faster parts, they said.
Only a handful of DRAM makers now produce SDRAMs in sufficient volumes for PCs. By late 1996, desktop manufacturers will be able to draw upon five or six volume suppliers with interchangeable parts.
Fujitsu produces about 800,000 SDRAMs per month, a spokesman said, with most going into Fujitsu and HAL Computer servers and workstations. Limited quantities go to the desktop market.
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