Wed, Apr 07, 2004 - Page 10 News List

Prices for DRAM set to increase

BIGGER PROFITS Analysts say spot prices for DRAM will likely rise by the second half of the year as supply runs short and the computer sector enters its peak season


Spot prices of memory chips used for computers are expected to exceed US$8 per unit in the second half of this year, fueled by accelerating computer replacement as a recovery in corporate spending is taking hold, analysts said yesterday.

Spot prices of mainstream 256MB/DDR 400MHz dynamic random access memory (DRAM) chips rose 3.8 percent to US$6.54 a unit after a nearly 11-percent spike on Monday.

"The unexpected price surge during the slow second quarter is an indication that the short supply of DRAM chips may drag on. We expect the situation to deteriorate during the second half when the computer sector enters the peak season," said Jerry Peng (彭茂榮), who tracks the memory chip sector for the government-funded Industrial Technology Research Institute (ITRI, 工研院).

Peng blamed snail-paced migration to advanced 0.11-micron processing technologies and a shift to the flash-memory business by some major memory-chip players for the inability of memory makers to keep pace with demand.

According to ITRI, global computer shipments are projected to rise 14 percent to around 170 million this year, driven by a pickup in corporate spending on information-technology products.

"That will push the likelihood that the spot price will skyrocket to an average US$8," Peng added.

The anticipated strong demand and short supply have boosted shares of the nation's leading DRAM makers ProMOS Technologies Inc (茂德科技) and Powerchip Semiconductor Corp (力晶半導體) yesterday. ProMOS jumped 5.58 percent to NT$22.7 and Powerchip rose 2 percent to NT$35.6 on the Gretai Securities Market (櫃台買賣中心), the country's over-the-counter market.

On the TAIEX, Nanya Technology Corp (南亞科技) dropped 0.3 percent to NT$30.10 and Winbond Electronics Corp (華邦電子) fell 2.1 percent to NT$18.50.

Despite Peng's upbeat outlook for this year, ProMOS and Powerchip officials said DRAM prices may start to dip during the slow April-June quarter before taking off again in the next quarter.

"We feel the prices will drop in the current quarter in line with the industry's cycle, but the decline will be cushioned," Powerchip spokesman Eric Tang (譚仲民) said.

DRAM spot prices are likely to fluctuate between US$5 and US$6 per unit in the current quarter, which will be good enough for domestic DRAM suppliers to reap big profits, said an industry analyst at ABN-AMRO Asset Management Taiwan, who requested not to be named.

"Our gross margin is already 50 percent," ProMOS spokesman Albert Lin (林育中) said. ProMOS is slated to break ground for its second advanced 12-inch fab in Taichung tomorrow.

Powerchip and ProMOS are expected to earn NT$5 and NT$4 per share for this year, respectively, based on a stable price trend over the next two quarters, according to the ABN-AMRO Asset Management analyst's forecast.

"Low visibility has long been a key feature of the DRAM sector," Tang said. "It is difficult to give a detailed forecast for the price trend, but the second half is usually a better period for us."

Despite the DRAM sector's volatility, Peng said Taiwan's memory-chip makers should expect to enjoy 35 percent revenue growth this year, with revenue totalling US$4.3 billion from US$3.2 billion.

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