Dark clouds hanging over the DRAM industry aren't likely to clear up until late in the first half of next year, analysts forecast.
Computer makers are still working off stores of memory chips stockpiled earlier this year for a drought that never materialized. In addition, demand for PCs has been weak, and a slowdown in global economic growth will likely keep sales subdued.
Those two factors together spell trouble for the DRAM industry's leading weather barometer. At US$3.39, the spot price for 64-megabit 8x8 DRAM has fallen 64 percent since January.
Analysts don't expect a rebound anytime soon.
"If we're talking about a rally, I believe it will happen in the second half of next year," said Andrew Teng, an analyst at Taiwan International Securities.
The weather could get worse before it gets better. Jovi Chen, who covers semiconductor companies for China Securities, says memory chip spot prices could sink as low as US$2.50.
Should prices drop that far, many of Taiwan's second-tier DRAM makers would be forced to temporarily cut back output or halt production.
At US$2.50, companies such as Nan Ya Technology (
But there is a silver lining. As second-tier companies take shelter from the storm, "that will hold back supply and give prices a chance to go back up," Chen said.
For now, a price of just under US$4 allows a majority of Taiwan's DRAM manufacturers to keep their heads above water. "At this level, most companies are at their break-even point," Chen said.
False forecast
The outlook for the DRAM industry wasn't always expected to be this gloomy. Earlier this year, industry watchers forecast a tightening in DRAM supply for the fourth quarter, with spot prices as high as US$10.
But as a result, computer makers took precautions, stockpiling enough provisions to see them through the expected drought.
"You had every Tom, Dick and Harry preparing for a shortage," said Dan Heyler, semiconductor analyst at Merrill Lynch.
In addition, Heyler said, to save money, PC makers reconfigured their products to use less bits of memory. That also crimped DRAM demand.
Now that spot prices have fallen to never-imagined lows, so too have the shares of DRAM makers, as one after another reports lower-than-expected monthly sales.
Winbond (華邦電子) is down 71.6 percent off its 52-week high, closing at NT$29.50 on Saturday. Nan Ya is off 71.6 percent at NT$21.70, Powerchip off 72.7 percent at NT$19.50, Vanguard off 71.6 percent at NT$17.60 and ProMOS (茂德科技) off 75.8 percent at NT$28.80.
In Winbond's case, the surprising turn of events has forced the company to scale back its capacity expansion plans. Winbond said last week that it would only start construction of one 12-inch wafer fab next year instead of two.
Rays of hope
Despite the poor outlook, there are some rays of hope, analysts say.
"DDR is one avenue out for DRAM makers," Teng said, referring to the new technology standard that is expected to boost the performance of memory chips.
"Most people already know that DRAM prices won't be good," Teng said, so they'll be shifting to products that "deliver a higher premium."
DDR is one of those products, as "the consensus is that production costs for DDR will be about the same as standard DRAM."
"Also, we're looking at Microsoft Windows 2000. If that product is successful, we think that will help stimulate demand," Teng said.
The latest version of Windows requires a muscular 128 bits of memory, instead of the more common 64 bits. If corporate customers upgrade to Windows 2000 in large numbers next year, DRAM demand could pick up.
What's more, 128-bit memory chips have higher margins than their 64-bit counterparts.
Other factors that could help stimulate demand include new processors from CPU-makers AMD and Intel.
DRAM makers also say that demand for memory next year won't be led as much by PCs, as sales of network servers, communication products, Internet appliances and consumer electronics grow.
"They'll require DRAM. More and more we'll see demand from the IA side," Teng said. "But it will take a while."
Chen said the non-PC segment can't be counted on to come to the DRAM industry's rescue, as those products account for little of overall demand.
Furthermore, he said, like personal computers, consumer products "are still threatened by the global economic slowdown."
Some memory makers are attempting to call attention to the fact that they do more than just make DRAM chips.
Winbond said it expects strong sales growth for its LCD-drivers, network game chips and communications chips next year.
Powerchip says DRAM will account for 50 percent of its output next year, while other memory chips and foundry work will make up the rest.
Vanguard, the misguided effort by TSMC's Morris Chang (
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained