Makers of computer memory chips, known as dynamic random access memory (DRAM) chips, are unlikely to see a V-shaped recovery in prices next year as they did in the first half of last year, Deutsche Bank said in its latest industry report.
While DRAM prices have thus far dropped by about 55 percent from their peak levels, they are expected to fall further until the second quarter of next year, Deutsche Bank said in a report called “Taiwan DRAM Industry on the Horns of a Dilemma” that was released on Tuesday.
Moreover, the market remains uncertain about the execution rate of DRAM makers’ transition to 40 and 35-nanometer process -technology, particularly Nanya Technology Corp (南亞科技) and Inotera Memories Inc (華亞科技), Deutsche Bank analysts Sc Bae and William Yang said in the report.
“Based on our assumptions on DRAM prices, the transition to 35nm and 40nm technology is crucial for profit generation and survival. We are not that optimistic about the 40nm transition at Inotera and Nanya in 2011 given both companies’ track records,” Bae and Yang wrote.
Even if both Nanya and Inotera were to make the technology transition, the two analysts said it would still be difficult for that factor alone to offset the likely continual fall in prices because of the resulting increase in supply against a weakening demand from the consumer end.
“This would still not guarantee [their] profitability,” they wrote.
The weakness in seasonal demand as well as high inventories at both DRAM makers and some major module houses have caused the average contract prices of the benchmark 1GB DDR2 (1 gigabyte, double-data rate two) chips to drop to US$1.81 per unit in October from US$2.31 in July, according to DRAMeXchange’s tallies.
Average contract prices of the benchmark chips were quoted at US$1.22 in the first half of this month, the Taipei-based online chip clearing house indicated on its Web site.
Deutsche Bank forecast the DRAM prices to reach US$0.8 per unit in the first quarter of next year after a short period of stabilization during the Lunar New Year holidays.
“While we forecast DRAM prices to rebound in 2011, we expect this to be capped at around US$1.1 to US$1.20 and, even then, the Taiwanese companies would still be loss-making,” Bae and Yang wrote.
Gartner said last week that the computer memory market is the “only segment” within the -semiconductor industry forecast to see revenue decline next year.
“DRAM is expected to decline 15.6 percent in 2011 due to weaker-than-expected PC demand and declining DRAM prices. NAND memory, however, is expected to grow 24 percent, as it is the main storage medium designed into many hot consumer electronic products,” the Stamford, Connecticut-based researcher said in a statement on Dec. 9.
In its report, Deutsche Bank maintained a “sell” recommendation on both Nanya and Inotera shares, with their target prices set at NT$9.50 and NT$10.50, respectively.
Nanya shares fell 0.92 percent to NT$16.2 yesterday and Inotera dropped 2.74 percent at NT$14.2, according to Taiwan Stock Exchange’s data. Bigger rival Powerchip Technology Corp (力晶) was down 0.87 percent to NT$5.68.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
Qualcomm Inc, the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump. Revenue in the three months ended in June will be US$8.8 billion to US$9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be US$2.15 to US$2.35 a share. Analysts had projected sales of US$9.08 billion and earnings of US$2.16 a share. The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover this year. The San