<What do you think of this> its about time to cut production, it is long overdue. thanks for the article
DRAM Makers Consider Cutting Production
Trapped in an oversupplied market that is continuing to slow down, DRAM (dynamic random access memory) makers are considering cutting production to control spiraling prices.
Even as serious consideration was being given to production cuts, DRAM prices in the international spot market fell to a new low, with the 64M units (for personal computers with processing speeds of more than 100 megahertz) fetching just $4.27-$4.53, down from the previous low of $4.56, industry reports showed.
It has been a couple of years since DRAM producers saw the need to contain the production of the DRAM chips to sustain prices, and it looks like this is happening again.
In a demonstration of the seriousness of the DRAM price situation, leading Korean DRAM makers, like Samsung Electronics, are believed to be consulting with the government on the pricing strategy.
``It is certainly not often that private companies consult with the government regarding marketing strategy, but semiconductors are a vital part of the Korean economy,'' said one official of the Ministry of Commerce, Industry and Energy.
Indeed, semiconductors, mostly memory devices, are expected to account for $25.5 billion in exports this year, making them the most important export product.
Another reality is that, with the export of 100 million DRAM chips per month, a cut in the price of just $1 translates to a reduction in the trade surplus of $100 million.
Against such a background, the prices of the 64 megabit DRAMs, the current market standard, have been falling sharply, to below $5 in the international spot market.
``What this basically means is that some companies are being forced to sell their products at below production costs, so naturally this problem has to be addressed properly,'' one MOCIE official said.
On one hand, he said, the spiraling prices provide an advantage to competitive companies whose production costs for the 64M chips are in the $3 range, giving them a chance to filter competition out of the marketplace once and for all.
On the other hand, companies like Hyundai Electronics Industries have seen their production costs go up, and in Hyundai's case mostly because of its huge debt, partly resulting from its takeover of LG Semicon last year.
``From all angles, it is apparent that the market cannot sustain the supply that DRAM makers are providing, and some type of adjustment is needed,'' the MOCIE official said.
But there is also the problem of computer companies and industrial watchdogs, which will accuse the DRAM makers of collusion if they decide to join hands in cutting production.
``As it had been in the past, it is not a move taken jointly by the companies, but the market situation warrants similar actions. It is not like they are saying `Let's cut production by 30 percent.' There is an oversupply in the market, and the adjustment in production is a necessary marketing strategy,'' the MOCIE official said.
``Right now, we are focusing on increasing the production of the 128M units, and systematically cutting that of the 64M chips. This had been the plan for months,'' said one HEI official.
Consequently, he said, there is not likely to be any sudden reduction in the production of the 64M chips, but the market will reflect the smooth transition to the 128M as the new standard.
jakenho@koreatimes.co.kr
ÀԷ½ð£ 2000/10/27 18:22 |
