Memory Makers Squeezed Into An In-Between Space IBD 3/24/98
By Reinhardt Krause
The new math for memory-chip makers hurting for profits adds up to 128, as in megabits. For the first time, makers of memory chips will produce an "in-between" product generation. Chipmakers in Japan and Korea are quickly readying chips that store 128 megabits, up fourfold from today's 64 megabit chips.
But memory-chip makers believe they have to break the pattern to restore profits. Last week, Mircon technology Inc. reported a wider-than-expected fiscal second-quarter loss. It blamed a memory- chip price war. Memory-chip prices plummeted 80% in '96 and slipped futher in '97.
The move to the "in-btween" chip shows just how anxious memory makers are to dig themselves out of a hole, analysts say.
"The reason they're moving to 128-mega-bit chips because they're not making money on the 64 mega-bit," said G. Dan Hutcheson, president of market researcher VLSI Research Inc. in San Jose, Calf.
Korea's Samsung Ltd. and Hyundai Electronics Corp. and Hitachi Ltd. are planning big pushes for 128 mega-bit chips. U.S. rivals Micron and Texas Instruments Inc. are following suit.
One way memory-chip makers have tried to rebound is by cutting back on production of 16-megabit memory chips. These chips have become a commodity product offering slim profit margins. The latest-generation chip, 64 megabit, might not take up the slack.
Memory-chip density - or storage capacity - historically has quadrupled in each new generation, from 1 to 4 to 16 to 64 megabit. Technicallly, that was the most efficient way to boot density. And, conveiently, the fourfold increase fit in with the growing memory needs of new computer software.
But memory makers are cutting 64-megabit DRAM prices sooner than expected, squeezing profits. Dynamic random-access memory is the most common type of memory chip.
By going to an in-between 128-megabit DRAM, chipmakers hope to keep prices and profits higher, while giving customers more bang for their buck. Also, the firms can make the 128-megabit chips without spending nearly as much on new equipment.
"This is a way to give (computer makers) more memory without having to make the major investment required to move to 256 megabit," said Jeff Mailloux, Micron's DRAM marketing manager.
Chipmakers can produce 128 megabit chips using manufacturing gear now in place, says Roberto Cartelli, Texas Instruments DRAM worldwide strategic marketing manager. " We are seeing it as a tactical opportunity," he said. :It's a way of putting more (memory) bits in the same package."
The biggest DRAM maker, Samsung, calls 128-megabit chips a "tranistional product". Company executives say the 256-megabit chips will be too expensive to make for several years, where the 128- megabit chips are more affordable. " It will fill a void created by price gap," said Avo Kanadijian, Samsung's vice president of maketing.
How the 128-megabit generation will affect suppliers of chipmaking gear remains to be seen. Purchase orders for gear needed to make 256-megabit chips could be delayed.
But "256-megabit chips weren't expected until 2001 or 20002 as a viable alternative to 64-megabit chips" anyway, said Brett Hodess, an anlyst at NationBanc/Montogomery Securities Inc.
To hike profits, most memory-chip makers started producing more 64 mega-bit in'97. They hoped computer makers would start shifting to denser memory chips - if the price was right.
By then, however, 16-megabit chips were selling for as little as $2.50 to $3 each. These low prices didn't give most computer makers any real incentive to switch to the 64-megabit chips. So memory-chip makers are sweetening the pot with the in-between 128-megabit chips, primarily in Asia.
Early demand will come from makers of high-end computers that need more memory advances, such as servers and work stations, analyst say.
Note book computers are another potential market, because they always need more memory into smaller spaces.
The big question is wether the lagest memory-chip users, desktop PCs, will embrace the 64-megabit generation, says Clark Fuhs, an analyst at San Jose, Calf.-based market researcher Dataquest Inc. If Pc makers don't gobble up 64-megabit chips this year, chipmakers will push stronger for 128 megabit devices. "The PC market will transition to either the 64-megabit or 128 megabit but not both,: said Fuhs. So some chipmakers could gain an edge, depending on which way the market goes.
A quick transition to 128-megabit chips is possible, says TI's Catlli. In terms of manufacturing cost, Texas Instruments sats most of the chipmakers will produce 128-megabit chips as effiiciently as two 64-megabit chips by mid-'99.
TI sees the 128-megabit generation as helping the industry meet computer demand in coming years. TI executives say the demand for denser chips might not be met because many DRAM makers have delayed the opening of new factories.
Micron says 128-megabit chips should come on strong in '99. Micron will start making the chips this year, though it still expects 64-megabit chips to take over in the consumer PCs, says Mailloux.
Samsung's Kanadijian says unit shipments of 128-megabit chips will grow to about 100 million worldwide in'99, from only 4 million or so this year. For consumers, the shift to an in-between chip generation maybe good news. It will make it easier for PC makers to cram more memory modules into systems. But for the industry, the oversupply of memory chips could linger. "if you take the exisiting (factory) capacity and transfer it up to 128-megabit chips, you just create more supply in a new part, and the prices come down,"
said VSLI's Hutcheson. "you still don't solve the problem."
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investors.com - you won't find the article there
but I thought I reference the source of the parent paper.
Memory/chip equipment makers are in a though position but
they all need DUV to progess towards denser and more
profitable memory products. Cymer is the player that has DUV production capacity lithography products. The company is
operating in a Macro semi-equip headwind. With an 18 month
wait list from order to product (the time frame I'm referring
to what was said in conf. call)
does an equipment maker want to cancel a DUV order?
Seems like the opportunity cost are too great.
My conclusion is that the above trend will benefit
Cymer. How long it takes for the realization of this
to become apparent is another matter. I'm unqualified
to even guess.
happy monday,
DKG |
