Memory chip market still cloudy despite DRAM output cut
The future of the computer memory chip market, hurt by the global high-tech slowdown, remains uncertain, analysts said yesterday.
Although prices of mainstream DRAM (dynamic random access memory) have plunged in recent months, it remains to be seen whether the sector has hit rock bottom, analysts said.
That casts a pall over major chipmakers in Korea, including Samsung Electronics and Hynix Semiconductor Inc.
Samsung is the world's largest computer memory chipmaker, with Hynix, formerly Hyundai Electronics Industries, taking third place.
A host of chip analysts in Seoul said a recovery in demand for DRAM may come in the second quarter in 2002, suggesting that Hynix's recent decision to cut its output will have little impact on the downward trend.
For all the gloomy prospects, Intel's decisive price-cutting policy for its Pentium 4 microprocessors, which power the latest PCs and notebooks, is expected to spur demand for DRAM in the longer term.
In addition, Microsoft's upcoming operating system, Windows XP, is also forecast to rejuvenate lackluster memory chip demand to some extent.
But analysts warned that the effects of Intel-Microsoft could be limited, citing previous supply-side attempts to shift sputtering demand into a higher gear that have mostly fizzled out.
Seoul's financial markets have been waiting for the sector to bottom out. Most agree on the second quarter next year as the turning point for the battered chip market.
One optimistic chip market analyst at SK Securities said the bottom may be touched in the third or fourth quarter this year, while another chip analyst at Meritz Securities said the worst will come in March or April next year.
Some analysts, meantime, took issue with the definition of bottoming-out. "Without defining the standard and which period should be compared, the discussion about bottoming-out is meaningless," an analyst at Samsung Securities said.
The underling assumption is that the global economy, which has been powered by the brisk growth of the U.S. economy with its tech sector at the forefront over the past decade, is now in a rut, dragging down the chip market as well as other sectors. The imbalance of supply and demand, therefore, has little to do with the current downdraft of the chip market, which is regarded as one of the worst in history.
Despite the conflicting views about definitions, analysts generally agree that a recovery in the embattled DRAM market is likely in the second quarter next year.
If the current downturn continues, cash-strapped and money-losing DRAM makers may shut down factories or embrace sweeping restructuring measures in the first quarter next year, after which the balance of demand and supply will stabilize, some analysts said.
There's talk in Seoul that supply now outpaces demand by 25 percent in the DRAM market.
Hynix, meantime, is enthusiastic about reducing its output to resolve floundering chip prices. But analysts said Hynix's output cut is targeted at 64Mb chips, whose impact on the whole market is rather limited.
Following Hynix's output cut announcement, Toshiba recently said it will close one wafer-fabrication line at the end of September, reducing its monthly output of DRAM from 27 million units to 20 million.
Hynix and Toshiba's output cut will reduce their inventory levels, but they will not benefit unless other major chipmakers join the drive en masse, analysts said.
The reduction of Hynix output is worth 7-8 days of global DRAM demand. But the current DRAM inventory levels are at 45-50 days, limiting the effect of Hynix's cut.
The chip market is shifting to high-end memory chips, such as 256Mb DRAM, as prices for 64Mb and 128Mb chips are plunging below production costs.
On the share performance of Samsung Electronics, semiconductor analysts said they are willing to buy Samsung at 170,000 won per share and to sell the stock at around 200,000 won.
Shares in Samsung were up 3,500 won at 190,000 won in late Monday trading.
Some analysts said if the chip market dips further, investors will be given a bargain-hunting drive for the blue chip. In other words, Samsung Electronics is likely to benefit from the restructuring of the chip market.
But Samsung's stock still faces lingering worries about its third-quarter earnings prospects.
And analysts said they would reduce their portion of Samsung shares if the stock prices goes beyond the 200,000 won barrier without recording better-than-expected earnings.
Hynix shares, meantime, drew skepticism from analysts. An analyst said it is difficult to apply a fundamental approach to Hynix as the cash-strapped memory chipmaker has a host of problems.
Hynix, of course, can bring sizable profits for risk-takers, on the condition that the company will survive the current crisis and ride the next upturn in the cycle of DRAM.
Shares in Hynix were down 40 won at 1,505 won in late Monday trading.
The bargain-hunting level for Hynix shares is near 1,000 won, while 1,500 won sparks little interest, analysts said.
Meantime, Daishin Securities projected yesterday that the PC industry may recover from the fourth quarter this year.
Daishin said global PC shipments for fiscal 2001 will grow 0.4 percent on year. It said Pentium 4's portion of Intel sales will be equal to that of Pentium III in the fourth quarter this year.
Separately, International Data Corp. last week predicted that revenues of chipmakers worldwide would fall to $38 billion this year from $50.3 billion in 2000, hurt by the slump in demand for PCs.
PC chipmakers saw their shipments during the second quarter fall year-on-year to around 30 million units.
IDC also forecast that the market will not recover until after 2005, and DRAM revenues will decline from $12.4 billion in 2000 to $6.6 billion by the end of 2001.
(insight@koreaherald.co.kr By Yang Sung-jin Staff reporter |
