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To: zsteve who wrote (48620)	9/23/1999 3:30:00 PM
From: DJBEINO	Read Replies (1) \| Respond to of 53903

Prices For DRAM Chips Soaring On Lost Taiwan Production By DERMOT DOHERTY, STAFF REPORTER TAIPEI -- Prices of dynamic random access memory chips have surged about 16% in the wake of Taiwan's worst earthquake in decades, but analysts said prices will likely subside by the end of the year. "There's panic buying in the DRAM spot market right now," said Don Floyd, head of Asian technology research at Credit Lyonnais Securities in Taipei, citing an expected sharp decrease in supply. "But the pricing now is unnaturally high." The spot price of a 64 megabit DRAM chip, the industry standard, is $17 in Taiwan, compared with $14.60 Friday and $4 in June. Tuesday's tremblor will cut a sizable chunk out of global DRAM supply and could push prices to as high as $20 during September and October, when seasonal demand tupically peaks. The earthquake cut power at the Hsinchu Science-based Industrial Park, the island's technology hub, and state-run Taiwan Power said normal power won't be restored before Sunday. The six-day outage, combined with expected lengthy recablibration of highly sensitive chip-making instruments, has sent its own tremors through the global computer industry. Taiwan-based chip makers account for as much as 15% of the world's DRAM production, and the island ranks fourth in semiconductor manufacturing, providing vital contract-manufacturing services for many PC industry giants. "You're looking at 4% of global (DRAM) supply lost over the next two months," Ford said, assuming a two-week loss in production. "In a market that's already experiencing shortages, that's definitely going to exacerbate the situation." With prices up more than fourfold since early June, the sustainability of current levels is doubtful, especially when manufacturers start to come back online, analysts said. "The quake will keep pricing at these high levels for longer than expected, but it's still very temporary," Floyd said. "The pricing now is just too high." Other industry experts concurred, saying the sharp hike in DRAM prices has been a knee-jerk reaction. "When you get a production problem, those who have DRAM will ramp up their prices," said Doug Lee, a regional electronics analyst at Goldman Sachs & Co. in Hong Kong. "But this is a purely speculative short-term move. I doubt that these spot prices will be sustainable. By year end, they'll be lower than what they are now." The spike in DRAM pricing this week has been fueled largely by a lack of information coming out of Hsinchu about the extent of damage to plants in the park. Winbond Electronics Corp. and Mosel Vitelic Inc., whose affiliate ProMOS Technologies is a major DRAM producer, have said it isn't possible to gauge the full extent of the quake's impact on facilities and production until full power is restored. Likewise, Vanguard International Semiconductor, a 27%-owned affiliate of global chip-foundry king Taiwan Semiconductor Manufacturing Co. (TSM), said Thursday its damage appraisal also has been hampered by a lack of power. Hsinchu-based chip maker Powerchip Semiconductor is expected to get back on its feet more quickly than others. Powerchip, 11% owned by Vanguard, had power restored to its plant within hours of Tuesday's quake because of a contingency agreement with a local power company. Also, the company's plants were built to withstand major earthquakes. "Mitsubishii Electric Corp. was instrumental in building Powerchip's fab," Ford said in a reference to the company's plant. "After the Kobe earthquake, it redesigned the fab so that it could withstand an earthquake of up to force nine." The Taiwan quake has a preliminary magnitude of 7.6. Unlisted Nanya Technology, a member of the Formosa Plastics Group, also escaped the worst because of its location in Taoyuan, just outside of the capital Taipei, analysts said. Copyright (c) 1999 Dow Jones & Company, Inc. All Rights Reserved.