The chief of South Korea's Hynix Semiconductor Inc said yesterday that the global microchip market may face a consolidation because of oversupply.
Hynix CEO Kim Jong-kap said that Taiwanese firms should change their market strategy to help the global chip market stop oversupply.
"Business conditions are not good ... Late comers must change their market strategy," he said.
"The latest slump in the semiconductor market is attributable to oversupply caused by Taiwanese firms, which have aggressively boosted production," he said.
Kim said oversupply may lead to "adjustment" in the chip market.
Last month, the Taiwan Semiconductor Industry Association (台灣半導體產業協會) predicted Taiwan's chipmakers would increase production output 16.9 percent to NT$121 billion (US$3.66 billion) in the third quarter from the previous quarter.
The Hsinchu-based association said the figure represented a rise of 5.49 percent from a year ago, following decreases in inventory levels caused by growing demand for PCs, mobile phones and other consumer electronics.
Taiwan is home to the world's two largest contract chipmakers -- Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電).
In the memory chipmaking sector, the nation has also seen a fast development in recent years by Powerchip Semiconductor Corp (力晶半導體), Nanya Technology Co (南亞科技), ProMOS Technologies Inc (茂德科技) and Inotera Memories Inc (華亞科技), who have all reportedly raised their capital expenditure (capex) this year, Digitimes.com reported last Thursday on its Web site.
The Taipei-based outlet reported that the nation's four major DRAM makers' capex this year would total NT$244.4 billion, up 20 percent from a year ago.
These companies would contribute most of their capex to upgrade their process technology from 90 nanometers to 70 nanometers, the report said.
Hynix, the world's No. 2 memory chipmaker by revenue reported a 35.5 percent slump in net profit in the second-quarter because of a sharp fall in prices of memory chips.
The Ichon, South Korea-based company aims to become the world's top chipmaker in 10 years through aggressive investment in next-generation products.
But its price competitiveness and profit margins have been hurt this year by the strong won and worsening business conditions, in which DRAM prices continued to fall.
"I have an optimistic long-term outlook as forerunners like Hynix and Samsung Electronics will be able to overcome current woes," Kim said, forecasting that market conditions would turn around next year.
Samsung, the world's top memory chipmaker, posted a 5 percent year-on-year drop in second-quarter net profit as a result of falling chip prices.
Stocks of Hynix and Samsung have recently been downgraded by global investment banks such as Goldman Sachs Group Inc, UBS AG and Deutsche Bank because of signs of oversupply in the DRAM market.
During the second quarter alone, the price of DRAM chips fell 37 percent. But prices will probably peak this month because of slowing sales in China, the Taipei-based Dramexchange.com (
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