Chipmakers face weak prices on supply glut

Computer memory chipmakers are facing growing price pressure this month as a result of persistent weak demand on a supply glut, bucking the traditional uptrend on seasonal demand, Taipei-based market researcher DRAMeXchange Technology Inc (集邦科技) said on Tuesday.

This month's contract price shrank 20 percent from two weeks ago following sagging demand in China during its National Day holiday as well as elsewhere, which has dealt a blow to the spot price, DRAMeXchange said in a report.

The price of dynamic random access memory (DRAM) has plunged more than 77 percent, it said.

"The current market oversupply has been an impediment for sustainable price increases," DRAMeXchange said.

While inventory has risen significantly, sales have also decreased, it said.

On top of that, DRAM makers have a disadvantage in negotiating contract prices during the second half of the year, as most computer makers tend to clear out inventory ahead of the peak earnings season, DRAMeXchange said.

Although some major DRAM makers said that they would stop supplying chips to the spot market, DRAMeXchange expected the move would do little to combat weak prices.

Japan's Elpida Memory Inc and Korea's Hynix Semiconductor Inc said earlier this month that they would lower the volume of sales or stop sales of chips to the spot market.

The price decline defies conventional price patterns, as DRAM sales are usually strong in October as a result of increased computer shipments ahead of the Christmas shopping season, DRAMeXchange said.

Last October, the spot price jumped sharply, it said.

Powerchip Semiconductor Corp (力晶半導體), the nation's top DRAM supplier, said earlier this month that last month's sales dropped more than 55 percent year-on-year and 30 percent month-on-month.

Powerchip expects demand to recover in the third quarter, pinning its hopes on a rebound in demand for Vista-enabled PCs with bigger memory space.

However, revenues only inched up 3.8 percent to NT$17.92 billion in the third quarter, from NT$17.26 billion in the slack second quarter.

Looking forward, Powerchip spokesman Eric Tan (譚仲民) said last week that improving PC demand and falling component stockpiles should boost DRAM prices.

The price of DDR2 512Mb 667MHz closed down 4.1 percent on Tuesday at US$1.39. The price was US$1.45 on Oct. 1. DDR2 512Mb before testing declined 11.4 percent to US$1.09 during the same period, DRAMeXchange said.