Asia DRAM Report: Attacks In US Push Recovery To 2H '02
By DERMOT DOHERTY
Of DOW JONES NEWSWIRES
30 Sep 2001
TAIPEI -- The pall cast over the global electronics industry by the recent terrorist attacks in the U.S. means a recovery in the dynamic random access memory (DRAM) chip market could be almost a year away, many industry experts say.
"Before (Sept. 11), there were signs of recovery, but since then some PC or PC-related components orders have been canceled, so we expect a 5%-10% impact on PC-related companies' sales in the fourth quarter," said Andrew Lu, head of regional semiconductor research at Salomon Smith Barney in Taipei.
"The attacks will hurt fourth-quarter consumer PC demand and that will cause the DRAM and foundry oversupply to last until at least the second half of next year," he added.
Average DRAM chip spot prices should also continue to languish, hovering around US$1.30-US$1.40 in the fourth quarter and 2002, Lu said.
That's not much higher than current levels and is well below the total manufacturing cost of US$3.50 for a 128-megabit chip.
Friday, the spot price of a 128Mb DRAM chip was trading in a range of US$1.10-US$1.30, compared with US$1.22-US$1.25 a week ago.
Despite a slew of production cuts and reduced spending on new capacity this year, the beleaguered sector continues to labor under a mass of inventory and excess supply.
On average, industry experts estimate DRAM manufacturers are holding between four and five weeks of finished inventory, above comfort levels of two to three weeks.
"Even though companies cut wafer capacity, it didn't stop technology migration," said Salomon's Lu, adding that bit supply in 2001 will grow 45%-50%, outpacing the 35%-40% increase in demand.
Many DRAM or module makers have yet to see downstream customers scale back orders since the U.S. attacks, but few doubt that it will happen in the weeks ahead, perhaps in mid-October.
That sense of foreboding, in turn, has triggered a gradual increase in selling pressure in the spot market, particularly from financially troubled Hynix Semiconductor Inc. (Q.HYY) and Micron Technology Inc. (MU), brokers said.
Chips made by South Korea's Hynix, the world's third largest DRAM maker, and Micron, the industry's No. 2 player, have been fetching around US$1.15-US$1.20, they said.
Run-Up To Peak Season Overshadowed By Events In US
Before the attacks on the U.S. and the looming threat of American military retaliation tipped the global economy into a state of uncertainty, there had been hopes among some in the DRAM industry that spot prices could see something of a rebound later this year. Others were predicting an improvement by mid-2002.
Indeed, just prior to the events of Sept. 11, spot prices had been relatively stable as a seasonal uptick in motherboard shipments - a key barometer of demand for DRAM chips - gave rise to hopes of a modest improvement in demand.
The reopening of schools after the summer vacation and the run-up to Christmas traditionally mark the high points of the year for the PC and DRAM chip sector.
Many companies were also banking on the release of Microsoft Corp's (MSFT) Windows XP operating system in October and Intel Corp.'s (INTC) new 845 chipset - and the growing shift to Pentium 4 machines - to give the PC sector a much-needed shot in the arm.
That hope has all but evaporated, with the launch of XP likely to be overshadowed by economic and political uncertainties in the U.S. and any increase in DRAM shipments expected to be limited in coming months.
"Everyone has turned very conservative on the Christmas season," said an official at one chip-product company. "Even though we haven't seen orders being cancelled yet, there's the expectation that it will happen, so everyone's worried about holding inventory."
Such is the glut that many DRAM makers, both large and small, have been skipping the packaging and testing stages of production in a bid to bring down costs and reduce stockpiles, he said.
"They're just selling off the wafers to module makers who then package, test and mark it themselves with their own brand," he said.
Pricing for higher-performance DRAM chips has also weakened over the past week, with the average spot price of a 128Mb Double Data Rate chip easing to US$1.93 from US$1.94 last Monday, according to DRAMeXchange, an online trading site.
A 128-megabyte Rambus DRAM module, meanwhile, was trading at US$46.50 Friday, down from US$48.00 a week ago. |
