The strategy of production line diversification has benefited Taiwan’s dynamic random access memory (DRAM) chipmakers, helping them to ride out recent market volatility, when the industry saw falling product prices and shrinking profit margins, analysts said on Sunday.
In the boom year of 2006, four of Taiwan’s four major DRAM companies — Powerchip Technology Corp (力晶科技), Nanya Technology Corp (南亞科技), Inotera Memories Inc (華亞科技) and ProMOS Technologies Inc (茂德科技) — posted up to NT$34.7 billion (US$1.08 billion) in combined net profits in the fourth quarter of that year.
However, because of excessive investment and production gluts in the global DRAM industry following the period of prosperity, memory chipmakers suffered a plummet in product prices amid fierce competition, with the four companies recording NT$61.3 billion in net losses in the fourth quarter of 2008.
Analysts said the downturn prompted the global memory chip business to scale back production, while Taiwanese memory chipmakers diversified to avoid excessive competition and remain in business.
Winbond Electronics Corp (華邦電子) has been cited by analysts as an example of the success of the local DRAM sector’s efforts in product diversification.
The analysts said Winbond has cut standard DRAM production to less than 30 percent, while boosting its specialty DRAM chips to 36 percent.
Standard DRAM chips are used in desktop computers, notebook computers and netbook computers, while specialty DRAM chips are used in consumer electronics and communications products.
Winbond has set up an in-house design center to tailor specialty DRAM chips to its customers. The design center is believed to have helped the company reduce production costs by cutting spending on outsourcing design work.
Winbond said in a statement that the company had been able to customize its products and their quality had given it an upper hand in pricing negotiations.
The analysts said that since the beginning of this year, global demand for specialty DRAM chips has been boosted by growing demand for digital TVs, set-top boxes and cellphones, with the market outlook for for the consumer electronics sector looking upbeat.
In addition to Winbond, ProMOS has decided to use at least 50 percent of its capacity to make DRAM chips for consumer electronics and mobile products, working with Japan-based chipmaker Elpida Memory Inc, the analysts said.
Powerchip and ProMOS have began production of NAND flash memory chips. NAND flash memory chips are used in data storage products.
While Powerchip’s 70 nanometer produced NAND flash chips have already hit the market, ProMOS has joined a government-funded alliance called the Taiwan Memory Co (台灣創新記憶體) to develop NAND flash technology.
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