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To: Return to Sender who wrote (10901)	8/8/2003 2:52:26 PM
From: Return to Sender	Respond to of 95823

DRAM Bulletin: Is price rise on the up and up? Disappointing June shipments cast doubt on market optimism by Nam Hyung Kim, iSuppli Semiconductor Business News 08/08/2003, 6:38 AM ET siliconstrategies.com The following column was provided by Nam Hyung Kim, a senior analyst with iSuppli Corp., an El Segundo, Calif.-based market research firm. After a one-week break, DRAM prices on the U.S. spot memory market have resumed their rise, as optimism over a second-half recovery eclipsed concerns over weak shipments in June. DRAM prices on the U.S. spot memory market this week rose for most parts, led by a 6 percent increase for 256Mbit Double Data Rate 266 (DDR266) SDRAM. DDR333 prices in the 256Mbit density increased by 4 percent. Pricing for several DRAM part types had declined the week before. DRAM megabit shipments in June grew by only 2 percent from May, according to World Semiconductor Trade Statistics. Such growth is far below historical levels for the month. For example, in the boom years of 1999 and 2000, June DRAM megabit shipments rose 10 percent and 13 percent respectively. Even in the disastrous year that was 2001, DRAM megabit shipments rose by 34 percent in June. In tepid 2002, DRAM megabit shipments rose by 23 percent for the month. The June results represent a disappointment for the DRAM market. The fact that sales rose only marginally indicates that there was no quarter-end inventory clearance among suppliers, an event that typically occurs at the end of June. This supports iSuppli's view that the driving factor behind rising prices in June was not an actual increase in demand, but expectations of future growth and a slowing in the increase of supply. Despite the June gloom, optimism over an expected second-half market recovery remains the major factor driving DRAM pricing trends. This optimism continues to spur spot market traders and distributors to build their DRAM inventories. Spot-market DRAM prices now have been on the rise for more than two months. However, these price increases are not stopping traders from continuing to buy DRAM. The increase in contract prices in August offered a positive signal to the spot market and traders now are willing to take on greater risk and build more inventory. Since June, inventory in the channel has built up significantly. However, traders continue to buy more DRAM in order to realize profits as prices rise in the near future. A look at demand trends reveals some encouraging signs. Taiwanese motherboard shipments are on the rise, following normal seasonal trends. Furthermore, Intel Corp.'s new 865 PC core logic chipset, which supports dual-channel, Dual Inline Memory Modules (DIMMs), has expanded their market share up to 40 percent of the motherboards shipped by the major manufacturers in August. This is helping to spur DRAM demand. iSuppli expects that DRAM contract prices will continue to increase until the end of August. However, after that point, conditions could change. If distributors and traders begin to liquidate their inventory in September, the channel could become flooded with DRAM. Furthermore, PC OEMs already are feeling a margin squeeze due to increased DRAM and LCD prices. In response to decreased margins, the PC OEMs soon could begin resisting further price increases. As always, the major factor determining DRAM pricing is end demand. All parts of the electronics supply chain will be closely watching the back-to-school season to see how much demand is generated. Nam Hyung Kim can be contacted at the following email address: nkim@isuppli.com

To: Return to Sender who wrote (10901)	8/8/2003 3:01:32 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95823

UMC Strikes Out On Its Own Arik Hesseldahl, 08.08.03, 2:20 PM ET forbes.com NEW YORK - There's an axiom in the semiconductor industry that says, as chips follow the curve of Moore's Law by getting more powerful and less costly every two years or so, the factories required to build them get more expensive. Companies that looked down the road and realized this had been teaming up. That's why Taiwan's second-largest contract chip manufacturer, United Microelectronics (nyse: UMC - news - people ), last year partnered with Advanced Micro Devices (nyse: AMD - news - people ) and Infineon (nyse: IFX - news - people ). UMC's plan was to share the risk and expense of building new chip factories, or "fabs," that would support next-generation 45- and 65-nanometer manufacturing processes (current circuitry is either 130 nanometers or 90 nanometers in size). But this week UMC said it was backing out of its last remaining big partnership with Germany's Infineon. The former plans to spend between $100 million and $130 million to buy out Infineon's stake in a $3.6 billion Singapore fab under construction. It's only the latest in a string of joint ventures to go sour. Earlier this year, AMD walked away from a plan with UMC to build a fab, also in Singapore, which was intended to allow both companies to develop the techniques they would need for 65-nanometer chips. AMD wound up working instead with IBM's (nyse: IBM - news - people ) Microelectronics unit. IBM, in turn, is also working with a UMC rival, Singapore-based Chartered Semiconductor (nasdaq: CHRT - news - people ), on developing next-generation manufacturing processes. The problem seems to be competing agendas. Chip manufacturers such as AMD, which makes the Athlon line of PC microprocessors and the Opteron line of server microprocessors, and Infineon, which makes PC memory chips, would want to use the advanced manufacturing methods on their own products, and not see them shared with potential competitors. As a chip foundry company, or one that makes chips under contract for other companies, UMC would want to offer those techniques to anyone willing to pay the right price. "UMC realized that joint ventures aren't really the way [it] wanted to go," says analyst Michael McConnell with Pacific Crest Securities in Portland, Ore. "Any time you have a joint venture between a foundry and an integrated device manufacturer like AMD or Infineon, some kind of conflict emerges. The IDM [integrated device manufacturer] wants it one way, and the foundry always wants it the other." Yet it may wind up hurting UMC in the long run. McConnell maintains a neutral rating on UMC, mainly because its advanced manufacturing technology--which he counts at 180 nanometers and below--accounts for less than 40% of the firm's revenue. "We have some concerns about the fact that [UMC hasn't] been able to increase revenue from [its] advanced processes. Until that changes, and until we see customers starting to migrate to the new process, we remain neutral," McConnell says. UMC and Infineon spun the announcement of their parting as a "success," saying the two had managed to jointly develop a 90-nanometer process technology that will move into production later in the year. They also claimed success in developing processes for building wireless phone chips with mixed analog and digital circuitry on 130-nanometer technology. The news followed UMC's reporting of a 40% drop in profits for the second quarter. The company also said it expects third-quarter shipments to fall by less than 10%, in part because of a drop in demand for mobile phones in Asia as a result of the SARS outbreak. The stock was down around 5% today to $3.60.