Samsung, Hyundai and LG Semicon will stop production of 16-megabit DRAM for up to eight days this month to try and end the slump in international spot pricing. The move is expected to ignite a DRAM price rise, although this is not expected to filter down to system prices.
DRAM is currently trading at below $7 a unit on international spot markets, down from a $10 peak in April. The big three Korean companies pulled-off a similar stunt at the end of January to try and pump-up a unit price of $6 at the end of 1996. A 25 per cent rise in DRAM pricing followed. The DRAM industry is expecting a similar, but slightly lower rise in August.
"It's fantastic," said Mark Leatham, sales and marketing director at Kingston Technology. "We will see some short increases in spot pricing, which is good as long as you are not buying it, although I am not convinced end users will be affected in any way. They haven't really benefited from the low DRAM prices this year because so many people were making-up the difference by putting a high margin on them."
Samsung, Hyundai and LG Semicon command a 40 per cent share of the worldwide DRAM market but suffered large dents in profits last year. However, they deny that the current weakness in pricing will impact on this year's profits forecasts. LG Semicon said that it can "absorb much of the impact from the weak spot prices," due to improved productivity.
The punch line? This story first published July 9, 1997
DRAM chips cut back to stop price drop
A host of major memory chip manufacturers are scaling back production plans for Dynamic RAM chips, the main memory used in all personal computers, in the hopes of stopping a precipitous drop in prices that has halved the cost of upgrading PC memory.
NEC will scale back production of 16-megabit chips from 11 million units a month to 9 million, according to the Nihon Keizai Shimbun, Japan's largest economic daily. This sharp reversal of fortune essentially dashes the company's earlier plans to crank up production to 18 million chips a month by December of this year.
NEC is Japan's largest chip maker and one of the world's largest memory chip manufacturers.
What NEC hopes to do is to halt the drop in memory prices by decreasing production. The stratagem--which Samsung and Hitachi are also adopting--may work, but the consumer is the winner in the meantime.
"[Prices have] hit rock bottom. They really can't go any lower," said a spokesman at L.A. Trade, a memory reseller in Torrance, California. Prices for 16MB of DRAM four months ago hovered between $300 and $400, but this amount of memory now sells for as little as $145, said the spokesman.
Other resellers believe that these low prices are here for good. "Prices might fluctuate a bit, but they'll never go back [up] to where they were," said an executive at an Anaheim, California-based memory reseller.
"[Customers] are delighted at the prices and are telling their friends, who are then calling in to buy more memory," said a salesman at the same company.
And in more good news for the PC-buying public, some PC vendors are also passing on memory price reductions. A Hewlett-Packard spokesman said that memory prices have "contributed" to its decision to reduce prices on its desktop PCs.
Currently, the 16-megabit DRAM chips themselves, which are sold to distributors and PC manufacturers, trade at just over $15, down from $45 early this year. And supply is still outstripping demand by about 15 percent, according to estimates.
In the past, NEC, Hitachi, and the other Japanese manufacturers were used to coordinating their production plans to largely control pricing. But with large Korean manufacturers now in the game, such monopoly has become more difficult.
And now fledgling Taiwanese memory manufacturing operations are hoping ramp up to large-scale production and intensify price competition even more. Some observers believe that this is pushing the Japanese and Korean manufacturers to cooperate to drive down prices in an effort to stop the Taiwanese from gaining a foothold in their market.
By Brooke Crothers
Staff, CNET NEWS.COM
June 6, 1996, 1:15 p.m. PT
DRAM supply cuts fail to stop price slide
Further shut-downs and exits seem inevitable
Posted 30 June 1998
Decisions by both Fujitsu and Acer to review their production of DRAMs because of their unprofitability have so far failed to have an impact on prices of memories, according to the UK channel.
Two weeks ago, Roy Taylor, joint managing director of Vanguard Microelectronics UK, said that oversupply by large manufacturers was crippling prices of DRAM, and said that the channel would welcome the withdrawal of big players from the industry.
Last Friday, Fujitsus president said that his company was reviewing its strategy on production of the memories, which have suffered a severe slump in prices over the last year. And Stan Shih, CEO of Taiwanese company Acer Semicon, said that his company was also reviewing production of DRAM.
The previous week, unconfirmed reports in the Japanese press said that Hitachi was also set to shut down its DRAM manufacturing subsidiary next year. The company has denied it has such plans.
But yesterday, Taylor said prices of DRAM remained flat, despite the news.
His views were echoed by Alan Stanley, MD of the UK arm of French distributor Dane-Elec. He said that prices were continuing to remain flat or continuing to fall.
Meanwhile, a report in US magazine Electronic Buyers News, said that Samsung, which manufactures over 40 per cent of DRAM worldwide, was committed to cutting DRAM production throughout 1998. According to the report, Samsung Semicon wanted to take a leading role in ending the over-supply and admitted that profits were being sharply affected by the situation.
According to the report, Samsung Semicon will continue to shut down its fabs one week every month, with the president of the operation calling for other manufacturers to follow its lead. |
