Mon, Feb 27, 2006 - Page 10 News List

Memory glut will lower prices: iSuppli

DRAM DELUGE The market researcher said in a new report that a ramp up of production by Samsung, Hynix, Infineon and Elpida is likely to cause a drop in memory chip prices

By Lisa Wang  /  STAFF REPORTER

The price for computer memory chips should start to fall soon as rising supply from the world's major players including South Korea's Samsung Electronics Co could hurt the nascent recovery, market researcher iSuppli Corp said in its latest report.

Taiwanese makers of computer memory chips, or dynamic random access memory (DRAM), led by Powerchip Semiconductor Corp (力晶半導體) said last month that the growth momentum would be sustained through the year in expectation of slower expansion in output from their bigger competitors.

That assumption, however, appeared fragile as the world's two largest DRAM suppliers, Samsung Electronics and Hynix Semiconductor Inc of South Korea, have started switching production from NAND flash to DRAM memory to improve profitability, iSuppli said in the report released last Thursday.

"All these moves are expected to send DRAM prices down again soon," iSuppli said.

Infineon Technologies AG of Germany and Elpida Memory Inc of Japan also said they planned to increase their DRAM shipments by 20 percent and by more than 60 percent, respectively, in the first quarter compared to the fourth, the researcher continued.

NAND is another type of memory widely used in consumer electronics such as Apple Computer Inc's popular iPod digital music players.

Slower seasonal demand, combined with overbooking and inventory adjustments, has caused NAND flash memory prices to drop by 18 to 25 percent in the past two weeks, according to the Taipei-based DRAMeXchange.

"Thus, the present weakness in the NAND market will soon translate into worsening conditions for the DRAM market," iSuppli said.

The global DRAM market is experiencing improved conditions and has been in a state of recovery since last month, the report continued.

The market price for DDR2 512 megabyte chips has risen about 40 percent to US$5.2 since the beginning of this year, offsetting a 6 percent drop in the mainstay DDR memory chips during the same period, according to DRAMeXchange.

Nanya Technology Corp (南亞科技), Taiwan's second largest DRAM maker, said earlier this month that the contract price for DDR2 would jump 20 percent this month compared to last month and would rise further next month on strong demand from customers such as Dell Inc.

Despite this, iSuppli believes that the global DRAM market has overheated, with many speculators and buyers overly concerned about recent developments in pricing for DDR 2.

This has caused prices to rise during what is normally a weak period for pricing and sales, it added.

"However, market conditions do not warrant such a sharp price increase in the first quarter. Thus, this rising price phase is set to end soon," iSuppli said.

The market researcher currently maintains a "neutral" rating for DRAM market conditions. However, with prices expected to start dropping again soon, that view could change shortly, it added.

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