Supply of computer-memory chips will outstrip demand by 3 percent next year as manufacturers including Samsung Electronics Co and Micron Technology Inc increase production capacity, according to Credit Suisse First Boston.
The brokerage lowered its stock recommendations for Micron, the world's second-largest maker of so-called dynamic random access memory chips, and Infineon Technologies AG, Europe's No. 2 chipmaker, to "neutral" from "outperform," and initiated an "underperform" rating on Hynix Semiconductor Inc.
Excess supply of DRAM chips will peak in the second quarter of next year when growth in demand for personal computers traditionally slows during that time of the year, CSFB said in a research report. Revenue from DRAM sales worldwide will fall 10 percent next year to US$24.5 billion partly because of an estimated 39 percent drop in prices, CSFB said.
"Investors aren't happy with DRAM investments," said Henning Gebhardt at DWS Investment in Frankfurt, which manages US$52 billion in equities including Infineon shares. "Looking at the recent past, even in the upturn companies weren't able to generate returns that are satisfying."
The Bloomberg Europe Semiconductors Index has dropped 22 percent this year, while the Bloomberg United States Semiconductors Index has fallen 19 percent.
Spending on chip-manufacturing equipment, a gauge of production capacity, will probably increase 53 percent this year to US$44 billion, the fastest pace of growth since 2000, according to an April forecast by market researcher IC Insights Inc.