The purchase of South Korea's Hynix Semiconductor Inc by US-based Micron Technology Inc may benefit Taiwanese DRAM (dynamic random access memory) chipmakers in the near term, but it could put more pressure on them to expand their operations, analysts said yesterday.
"I think it's a positive because it will reduce the production supply for the medium term," said Rick Hsu (
"Now we're in a bit of an over-supply situation, but probably from the third quarter we will return to a supply shortage situation. This is going to trigger price hikes."
Hsu said Micron might have to shut down as much as a third of Hynix's production lines in order to upgrade them, leading to a reduction in the overall supply of DRAM memory chips.
Optimism that the Micron-Hynix deal will bode well for local DRAM makers lifted their stocks, despite a 72 point tumble on the overall market. DRAM maker Mosel Vitelic Inc (
Hynix earned the wrath of much of the DRAM industry last year by gaining US$4.9 billion in emergency loans to stay in business despite a severe market downturn.
Many industry pundits believe that, had the Korean government let Hynix fold last year, it would have immediately wiped out the over-supply and led to a stabilization of prices. No company, Taiwanese or other, made money in DRAM last year.
Micron agreed to buy Hynix earlier this week for US$4 billion in cash and stocks.
The deal makes Micron the largest maker of DRAM chips in the world with around 34.5 percent market share in the business, surpassing Samsung Electronics' 27 percent market share, based on research from Dataquest, the market research firm.
"The fewer they get, the more worried these OEM customers are," said Charles Kau (高啟全), vice-president and spokesman of Nanya Technology, referring to the dominance Micron and Samsung now hold in the DRAM market.
Although both companies benefit from economies of scale, Kau believes that the computer makers which purchase the most DRAM, such as Compaq Computer Corp and Dell Computer Corp, will likely outsource more orders to smaller players so as to prevent Micron or Samsung from dominating the market and controlling pricing.
Some Taiwanese companies, such as Winbond Electronics (華邦電子) and Mosel Vitelic, linked up earlier this year with Infineon Technologies AG, Europe's largest DRAM maker, to ensure their ability to compete as part of a larger entity, according to Milton Huang, chip analyst at National Securities Corp (建弘證券) in Taipei.
In return for help with chipmaking technology, Winbond will produce memory chips on behalf of Infineon, while the German chipmaker increased its equity stake in ProMOS Technologies Inc (茂德科技), a joint venture with Mosel Vitelic, from 38 percent to 48 percent in an effort to gain more production from the venture.
As for Nanya, which has been in discussions with Infineon for the past few months, no conclusion has been reached yet.
"Nanya is a small company, so we don't rule out forming alliances with other companies," Kau said.
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