Bloomberg News

Samsung Sees DRAM Chip Prices Staying Around Current Levels

September 29, 2011

(Adds DRAM prices in fifth paragraph.)

Sept. 29 (Bloomberg) -- Samsung Electronics Co., the world’s largest maker of computer memory chips, forecast prices of the semiconductors will probably stay around current levels, a situation that will continue pressuring its smaller rivals.

There won’t likely be “a drastic rebound” in prices for chips used in personal computers, Kwon Oh Hyun, head of the company’s chip division, said in an e-mail in reply to questions from Bloomberg News, without giving a time frame for the forecast. The Suwon, South Korea-based company’s chip business is “on track” to meet its capital expenditure plan for this year as Samsung widens its lead over competitors, Kwon said.

Samsung is one of only three DRAM makers among the top eight generating profit from selling the memory devices used in computers to run multiple programs simultaneously, after slowing PC sales led to an industrywide slump. Kwon’s comments echo an outlook this month by Nomura Holdings Inc., which said any rebound in chip prices is likely to be temporary in a “bear market” that is forcing smaller manufacturers to cede share.

“Weak demand is an ongoing factor, while the cost gap between first-tier names and second-tier names will likely continue to increase,” Chung Chang Won, a Seoul-based analyst at Nomura, wrote in a Sept. 21 report.

The price of the benchmark DDR3 2-gigabit DRAM, which has slumped more than 70 percent over the past 12 months as PC sales slow, climbed for the first time in six months in September with a gain of more than 7 percent, according to data from Taipei- based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.

Output Cuts

The drop in prices has forced some chipmakers to reduce output. Nanya Technology Corp. cut production of DRAM, or dynamic random access memory, because of a glut, Pai Pei-lin, a spokesman for the Taiwanese chipmaker, said Sept. 14. Inotera Memories Inc. based in Taoyuan, Taiwan, also lowered DRAM output, President Charles Kau said the same day.

Elpida Memory Inc. said it’s considering moving some chip production from Japan to Taiwan to deal with a strong yen and the market slump.

Samsung will focus on improving technology and expanding sales of chips for non-PC products such as mobile phones and servers to remain competitive, Kwon said. He reiterated Samsung isn’t planning to acquire a DRAM maker, as the company is exploring opportunities in areas with growth potential.

Samsung, which controls about 40 percent of the DRAM market, this month began operations at a new 12-trillion won ($10 billion) factory in Hwaseong, outside Seoul. At the plant, which Samsung says has the industry’s largest capacity, the company began mass production of DRAM chips with a circuitry narrower than 30 nanometers, the first in the market.

Samsung said it plans to further shrink its chips to less than 20 nanometers next year while increasing output of NAND flash memory, which stores data in consumer gadgets such as Apple Inc.’s iPad.

--Editors: Suresh Seshadri, Subramaniam Sharma.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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