Fri, Mar 09, 2001 page17

• Hyundai's DRAM output cut may help spot prices

  • By Dan Nystedt / STAFF REPORTER
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  South Korean electronics giant Hyundai (現代) yesterday said it plans to reduce DRAM chip production at its Eugene, Oregon plant in the US -- leading to hopes that beleaguered Taiwanese memory makers may benefit from a rise in spot prices soon.

  Hyundai vice president of marketing, Sarhad Tabrizi, told the Taipei Times by phone yesterday that the firm would substantially lower production because of low DRAM prices.

  Tabrizi also said a local media report regarding Hyundai plant closures was "definitely not true."

  A Chinese-language economic daily reported yesterday that two of Hyundai's DRAM manufacturing plants in South Korea, Fabs No. 5 and No. 6, would be closed. In fact, only the Eugene plant -- which produces eight million 64Mb equivalent DRAM memory chips per month on 35,000 eight-inch silicon wafers -- will be affected.

  Tabrizi cited the high cost of operating the plant and the low market price for benchmark 64Mb DRAM chips as reasons for scaling back operations at the plant.

  "This is just a temporary measure to basically bring some balance into the DRAM supply situation ... this is nothing permanent and will be resolved as soon as the financial and market condition improves. I think this is good news for the DRAM industry in general," Tabrizi said.

  Although the news failed to move the local bourse, it did lead to speculation that DRAM spot prices could soon rise.

  DRAM chips are used in a wide range of electronic products, and they are bought and sold on a spot market in the same manner as commodities such as oil and gold.

  The spot price for 64Mb DRAM has hovered between US$2 and US$3 per chip over the past several months, down from a high of nearly US$9 in July. The price is far below the US$3 per chip analysts say Taiwan's DRAM manufacturers need to turn a profit.

  Low chip prices are to blame for what will likely be a first quarter operating loss at Winbond Electronics (華邦). Officials at the firm, one of Taiwan's top DRAM makers, also say memory prices will dictate second quarter results as well.

  But not everyone was in agreement that Hyundai's production cutback would translate into higher DRAM prices.

  "I think the inventory level at all manufacturers is still too high to be really saved by the cutback," said Jovi Chen, analyst at China Securities.

  Inventory levels of memory chips are still high, with most companies reporting a six-week supply or more. Chen predicts that the spot price for DRAM could start to rise in mid-April.

  The local stock market's reaction to Hyundai's cutbacks were mixed. Investors have been looking for signs of a DRAM price rebound, but the stock price of local DRAM companies moved little.

  Most companies in the sector, including ProMOS (茂德), Powerchip (力晶), Mosel Vitelic (茂矽) and Winbond, have seen stock gains of between 10 percent and 15 percent over the past four trading sessions. Profit-taking has kept share prices in check.

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