DRAM makers cut output as prices plunge further

By Lisa Wang  /  Staff Reporter

Fri, Aug 12, 2011 - Page 11

Taiwanese DRAM chipmakers, including top producer Nanya Technology Corp (南亞科技), are cutting production to alleviate an oversupply, which has driven DRAM prices down almost 16 percent, near to most manufacturers’ cost levels, Taipei-based market researcher TrendForce Corp (集邦科技) said yesterday in a report.

The biweekly decline was the biggest since June, TrendForce said.

The contract price for benchmark 2GB DRAM chips plunged to US$1.31 per unit in the first two weeks of this month from two weeks ago, TrendForce said, adding that the downtrend would continue through this month as demand for computers was expected to be below seasonal norms because of a weak global economic recovery.

“Just another 5 percent drop and chip prices will fall below cost levels,” a TrendForce analyst said by telephone. “They [DRAM chipmakers] need to slash production to prevent a recurrence of the severe slump during the financial crisis in 2009.”

Taiwanese DRAM companies recently started cutting output or stocking chips produced to slow cash outflows as the more chips they sold, the more money they lost, TrendForce said.

Financially troubled ProMOS Technologies Inc (茂德科技) initiated the first move, halving its target DRAM output this month to 25,000 units from 50,000 units last month. The chipmaker did not rule out implementing deeper cuts.

Nanya Technology and Powerchip Technology Corp (力晶科技) began trimming output recently, TrendForce said.

Nanya Technology spokesman Pai Pei-lin (白培霖) had said last month that the company would not consider reducing production unless chip prices drop below its cost level.

Powerchip is considering accelerating production cuts to cope with the steep price decline and was in discussion with its sole customer, Tokyo-based Elpida Memory Inc, about stocking chips.

TrendForce said unless South Korean chipmakers followed suit and cut output, it would be difficult to see the 20 percent supply glut level off and bring an end to the price declines.

However, chip giant Samsung Electronics Co was likely to keep its factory running at current levels thanks to stable yields on its 35-nanometer (nm) chip process technology, TrendForce said.

The company is also set to start mass production of chips on 28nm technology in the second half, the researcher said.

Lagging behind Samsung, Taiwanese DRAM chipmakers are ramping up production using 40nm technology and are expected to start pilot production on 30nm technology this quarter.