DRAM prices rise as HP issues recall

UNEXPECTED DEMAND: Some anlaysts are hoping that semiconductor makers will get a quick boost from Hewlett-Packard's decision to recall flawed memory modules

By Lisa Wang  /  STAFF REPORTER

Tue, Jun 29, 2004 - Page 10

Taiwanese computer memory-chip makers led by Nanya Technology Corp (南亞科技) are likely to get a boost during a traditionally slack season, aided by unexpected demand from Hewlett-Packard Co's recall of flawed memory modules in certain notebook computers, industry watchers said yesterday.

"The recall may result in an earlier arrival of the annual back-to-school peak season, which usually sets in in August," said Liu Szu-liang (劉思良), an industrial analyst with Yuanta Core Pacific Capital Management (元大京華投顧).

"Memory-chip makers Nanya Technology and ProMOS Technologies Corp (茂德科技), which have greater presence in the contract market, will have a higher opportunity of benefitting from the unexpected boon," Liu said.

HP, the world's No. 2 notebook computer vendor, announced over the weekend that it is providing its consumers with free dynamic random access memory (DRAM) modules if they find they are among some 900,000 laptop computer users affected by a flaw that can cause screens to turn blue and the computer to lock up.

The unusual chip demand createdby the recall will trigger more aggressive inventory buildup from computer channel vendors and memory module suppliers as part of preventative measures, Liu said.

Shares of Nanya Technology, Taiwan's No. 1 DRAM supplier, were unchanged at NT$25.20 on the TAIEX yesterday. Powerchip Semiconductor Corp (力晶半導體) shares jumped 3.02 percent to NT$27.3 on the Gretai Securities Market, the nation's over-the-counter market. ProMOS shares were unchanged at NT$18.30 on the Gretai.

But the DRAM module glitch may only be short-lived, said Paul Tsai (蔡昀達), a fund manager who oversees a NT$500 million fund for International Investment Trust Co (國際投信).

HP will need a total of 7.2 million DRAM chips at maximum for the 900,000 notebook computers, and the amount will only take 10 days for any one of Taiwan's three DRAM makers to produce, Tsai said.

"How strong the demand is for computer motherboards in the sensitive clone market, however, will be a benchmark for the second half of the year for the DRAM sector," Tsai said.

Tsai recommended investors keep patient for now, as there are no clear signs of the level of demand for DRAM chips and computers as of yet.

He also said he expected memory-chip prices to seesaw higher in a narrow range during the first half of next month.

On the DRAM spot market, the price for DDR 265Mb/400 memory chips bounced back 1.26 percent to US$4.86 apiece yesterday, according to online analyst DRAMExchange, based in Taipei.