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To: Jim Green who wrote (2599)	2/18/1998 9:34:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

Expect Memory Prices to Be Firm Near Term (Lehman 02/16/98 ) * Inventory level at one of Taiwan's DRAM companies is low. * The ITC ruling against Taiwan SRAM manufacturing in its anti-dumping investigation may generate upward pricing pressure in both SRAMs and DRAMs. * We do not expect the ITC ruling to have any negative impact on Taiwanese semiconductor companies yet. * We believe DRAM and SRAM prices should be firm in the short term. We believe dynamic random access memory (DRAM) and static random access memory (SRAM) prices should be firm in the short term. We came to this conclusion based on the following observations: In our discussion with Vanguard International on Friday, the still-private Taiwan DRAM company stated the following: (1) The price of a 16-megabit EDO DRAM (4x4 configuration) has been holding steady at about US$3.50-US$3.60. Demand for EDO DRAMs are particularly strong in the U.S. because of the success of sub-$1,000 PCs which use primarily EDO DRAMs and not synchronous DRAMs. (2) Vanguard's finished goods inventory is quite low right now. In December, when DRAM prices were below US$2, Vanguard stopped selling its products. The resulting inventory has been digested by now. (3) The company said that it has seen some Hyundai DRAM parts in the market marked with January time stamps. (4) Some customers are increasing the size of their orders. Most of Vanguard's customers are distributors, not PC companies, and so it is not clear if end demand has picked up. Nevertheless, we believe this to be a positive signal. (5) Companies that were not interested in qualifying Vanguard's parts in 1996 and 1997 are now willing to do so. Meanwhile, the U.S. Department of Commerce found that Taiwan companies, including the two largest SRAM producers Winbond (2344.TW, NT$53, rated 3- Neutral) and UMC (2303.TW, NT$77.50, rated 3-Neutral), were dumping their SRAM products in the U.S. market and the commission will impose stiff tariff penalties starting in April. We expect this will have negligible negative impact on the Taiwan SRAM producers because Taiwan SRAMs are used mostly in PCs and we believe motherboards with SRAM already installed are not subject to the tariffs. The ITC ruling should help to support SRAM prices in the short term. It may also support DRAM prices since Micron Technology (MU, US$35 1/16, rated 4- Underperform), who derives much more revenue from DRAMs than SRAMs, may have been testing the water with its SRAM anti-dumping complaint. Going forward, we expect Taiwan DRAM and SRAM manufacturers will be more cautious when lowering prices. All these, in our view, are catalysts for firm DRAM and SRAM prices in the short term.