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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Captain Jack who wrote (77153)	1/30/2000 1:17:00 PM
From: Captain Jack	Respond to of 97611

By Michael Kramer TAIPEI, Jan 30 (Reuters) - Microchip supply chain problems in Asia caused by a major Taiwan earthquake may have temporarily hit profits for major U.S. PC makers, but analysts and executives in Asia warned that a capacity shortage was looming. Dell Computer Corp <DELL.O> warned of on Thursday that earnings would fall short of expectations due to tight component supplies and a Y2K-related sales drought. Gateway Inc <GTW.N>, which made a similar warning earlier in January, posted a profit slide on January 20. While both Dell and Gateway cited patchy supplies of Intel <INTC.O> microprocessors as chief among their shortage woes, computer industry executives in Asia said a powerful September 21 earthquake in Taiwan, a major components centre, also distorted the two PC makers' supply chain. QUAKE CAUGHT PC MAKERS SHORT "Chip supply problems that led to lower-than-expected earnings in the fourth quarter for PC makers are a result of an earthquake in Taiwan in last September," said an official at Samsung Electronics Co, <05930.KS>, the world's largest memory chip maker. "The supply was tight and PC makers such as Dell and Gateway that did not keep much chip inventories were forced to cough up high prices and their profits were hurt," he said. The Taiwan earthquake, which killed 2,400 people and disrupted the local computer components industry for about two weeks with power cuts and electricity rationing, came just as sales were hotting up for the peak yearend sales season. Taiwan firms make about 20-30 percent of the world's motherboards and are expected to manufacture 20 percent of the world's dynamic random access memory (DRAM) in 2000, up from a 12-percent share in 1999. Prices of DRAM, the basic building block for computer memory, spiked sharply higher due to panic stockpiling after the Taiwan quake, but have since eased as damage to components makers was less than feared and corporate computers sales dropped as companies took precautions on the millennium bug. The Samsung executive said 64-megabit DRAM had fallen to about $7.5 from a 1999 peak of over $20 in October, while a Toshiba Corp <6502.T> spokesman said 128-megabit DRAM prices had weakend to below $20 from $23 in Autumn last year. While most analysts and chip company executives say they expect flat DRAM price throughout the first half of 2000, they warn that prices are expected to climb in the second half. WINDOWS 2000 TO PROD DEMAND Sluggish capacity expansion during the Asian financial crisis would begin to bite just as Microsoft <MSFT.O> prods more computer users to upgrade their systems by releasing the latest version of the widely-used Windows operating system. "Most of the major semiconductor manufacturers in Japan, Korea and Europe told us this month they view the decline in this quarter to be limited due to the launch of Windows 2000," said said Hideki Wakabayashi, senior analyst at Dresdner Kleinwort Benson in Japan. "Many say the DRAM price will continue to slide in second quarter but expect conditions to turn around starting from third quarter as PC makers' demand picks up," he said. "Given the tightness of overall chip supply conditions with no major newcomers in the market, it is hard to beleive there will be a large-scale correction in the DRAM market in the near term," Wakabayashi added. Virtually no DRAM makers expanded capacity during a four-year slump in the highly cyclical semiconductor industry which bottomed out in 1999. "It's a components cycle and components are very, very tight," said Don Floyd, head of Asia technology research at Credit Lyonnais in Taipei. "A lot of firms here in Asia found themselves lying down because they couldn't obtain components." OVERPESSIMISM LEADS TO UNDERSUPPLY "I think you had overpessimism," Floyd said. "You had a period of poor pricing partially exacerbated by the Asian financial crisis -- that added to lack of capacity. And in addition you're seeing pretty good global demand." Dedicated chip foundries such as Taiwan Semiconductor Manufacturing Co <2330.TW> and United Microelectronics <2303.TW> are already telling customers their order books are full for months to come. Foundries, which make semiconductors on behalf of other firms, generally make high-margin logic chips rather than commodity memory chips such as DRAM. ((Taipei newsroom, +886 2 2508-0815 fax +886 2 2508-0204, taipei.newsroom@reuters.com)) REUTERS