Prices of the most widely used computer-memory chips rose for a second week, but industry watchers are mixed over the reason for the increase.
"It appears that DRAM makers are controlling their supply to the market in order to prop up the average selling price right now,'' dramexchange.com said in its weekly comment.
Dramexchange.com is a Taiwan-based marketplace for chipmakers seeking to sell chips that haven't been shipped under contract to large clients.
"Inventory is being built up in the food chain," it said.
Personal computer makers, the main buyers of memory chips, and traders have increased stocks on concern of a possible interruption in supply caused by fallout from the war in Iraq.
The spot price of the benchmark 256-megabit, 266-megahertz double-data-rate dynamic random-access memory (DDR DRAM) chip remained unchanged yesterday at US$3.70. The price has risen 17.5 percent in the last nine trading sessions, according to dramexchange.com.
However, one analyst disagreed with dramexchange.com's analysis, saying a recent anti-dumping decision by the US Department of Commerce and the European Union's Trade Commission against Korean DRAM maker Hynix Semiconductor Inc may have reduced the oversupply of chips in the market, allowing prices to recover briefly.
"The major jump in prices recently has been because of the Hynix situation," said Paul Hsu (
"Hynix has been fined by both the US and EU," he said.
The EU and US claim that Hynix receives huge government subsidies, allowing it to sell DRAM chips at below-market prices. They have proposed tariffs of between 30 and 58 percent on Hynix's chips.
Stocking up because of war jitters may subside as US and British forces make progress in Iraq, another analyst said.
"There are some signs that the pre-stocking by the middlemen is near the end as the war seems to be progressing smoother than expected," said Chris Hsieh (
"Whether the price goes up further depends on end demand and we are not anticipating that," he said.
While prices have surged, they remain below the US$4 level at which producers in the US$16 billion industry can make a profit. At less than US$3.50 per chip, some companies must consume cash to stay in production, some analysts estimate.
Between 10 percent and 20 percent of the millions of chips made every month are sold on the spot market. Most are sold in long-term contracts between producers such as Samsung Electronics Co and Infineon Technologies AG and big computer makers such as Dell Computer Corp.
Chip prices normally peak in the third quarter as computer makers stock up ahead of the year-end holiday season, when they sell most of their machines. Prices usually decline steeply in the first quarter before beginning to rise sometime in the second.
Highlighting the impact on chipmaker earnings that low prices are having, Taiwan's DRAM makers reported huge losses yesterday, causing their share prices to slip on the TAIEX.
Nanya Technology Corp (
Powerchip Semiconductor Corp (
"The global DRAM output of 2002 has grown 30 percent against year 2001, but the market supply is still over demand," Powerchip spokesperson Eric Tang (
Winbond Electronics Corp (
Winbond closed at NT$13.95 yesterday, down NT$0.45, or 3.1 percent.
A Chinese-language media report yesterday speculated that Powerchip's loss for the first quarter of this year would exceed NT$1 billion.
Rivals ProMos Technologies Inc (茂德科技) and Winbond are expected to report first-quarter losses below NT$1 billion, the report said.
The recent DDR DRAM price increase may be only temporary, adding to the makers' woes.
"It's a gloomy outlook for the rest of the year," Hsu said.
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