Taipei Times: What is your view on the DRAM industry in the second half of this year?
David Sun (孫大衛): Prospects for the DRAM industry are looking good, if the market situation stays normal. The use of DRAM is expanding from PCs to a lot of new products such as mobile phones, videos and servers.
And supply is limited. Most DRAM companies are migrating to next-generation technologies, which will take time to churn out the massive output.
PHOTO: CNA
I believe supply will match demand, or will even be less than demand. Most companies should be able to generate cash and make profits.
TT: What is your take on growing capital spending from DRAM companies, especially Samsung Electronics of South Korea this year? Samsung said last month it intends to spend a total of 18 trillion won (US$15.84 billion) in capital spending this year, of which 9 trillion won would be spent on memory business.
Sun: Samsung produces a variety of products. I do not think it will bet the money solely on DRAM. And there is the risk of breaking anti-trust rules if Samsung greatly expands capacity to boost market share over 50 percent.
With so big a market share, I do not expect Samsung to wage a price war to force marginal players out of the market at the expense of losing big money. I believe Samsung sees the business potential.
TT: Do you think the benchmark DDR3 DRAM price will fall below US$2.5 per unit?
Sun: Frankly, DRAM companies should feel pressure to reduce prices as supply is exceeding demand. But, I don’t expect the spot price of DDR3 will fall to less than US$2.5 per unit in the short term, as PC makers eventually have to increase memory space on computers [along with sales of new operating systems, or software later this year].
TT: Will the 30 percent salary hike planned by Hon Hai Precision Industry Co (鴻海精密), which owns Foxconn in China, for its Chinese employees, following a series of suicides, make you rethink future factory expansion in China?
Sun: We have two factories in Shangahi and Shenzhen. We employ over 2,000 workers there. I think the cost of labor is still lower there than in Taiwan, even after the 30 percent hike in monthly wages.
But we are very cautious about capacity expansion across the strait. We don’t expand capacity aggressively. Our strategy is outsourcing half our manufacturing to other companies in China and Taiwan, meaning that we will increase outsourcing to cope with growing business.
Kingston operates a factory in Hsinchu, where we employ about 800 people, including a sales marketing department.
TT: Kingston has been making money every year since its inception 23 years ago and generated US$2.46 billion in revenues last year [based on DRAMeXchange Technology Inc's (集邦科技) tally] with a small number of staff — just 3,800 in total. What is the secret behind this?
Sun: Making memory modules is a very simple business. The key is how to manage variables in the memory industry. We are a small company, which allows us to make decisions fast and with greater flexibility than big conglomerates.
Besides, managing the supply chain is also important. Kingston ships 30 million memory units a day to 30 countries and 97 percent of them are produced on the same day. We almost have no inventory at all.
Operating efficiency is also important. We can churn out 30 percent more high-quality output than our competitors on the same machine.
What makes this happen? Good employee understanding is essential. Most of our employees have been working with the company for over 10 years and they are willing to do good things for the company.
We do not have a strict appraisal system to manage the company as most companies do. We even have to educate our employees that they do not have to make more money than last year.
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