Analysts tell DRAM firms: 'Something will happen…'

Analysts tell DRAM firms: ‘Something will happen…’
“Don’t worry,” says Malcolm Penn, “something will lead to a correction in 1999”. David Manners DRAM manufacturers need a ‘de-tox’ clinic to wean them off the product, said Malcolm Penn, chairman of Future Horizons, at his company’s annual strategic analysis and forecast of the European semiconductor industry in London last week. “The industry is in a hole but it won’t stop digging,” said Penn, who quoted a Korean industry leader as saying: “One year of windfall profit would more than make up for years of hardship.” “In the 1993-5 boom the DRAM industry made $2bn profit a month on the 16Mbit DRAM alone,” said Penn, “such happy memories are the reason why most firms are trying to hold on, waiting for the next upswing.” Penn reckoned that “something will happen this year which will take capacity out, and which will lead to a correction in 1999”. Asked what that might be, he replied that it could be a Korean rationalisation. A merger of Samsung Semiconductor and LG Semiconductor is being talked about in the Korean press. Without a major reduction in capacity, Penn reckons someone will go bankrupt. His forecast of a slight growth in the worldwide semiconductor industry for 1998 to just under $150bn is based on a significant reduction in capacity. After 1998, Penn’s predictions are buoyant, expecting a surge in industry revenues from 1999 onwards to reach $248bn in 2003. However, the prospects of a contraction in DRAM output were not helped by the announcement by Micron, which has just taken over TI’s DRAM business, that it would move as quickly as possible to convert TI’s fabs from 0.3/0.35?m to 0.21?m thereby more than doubling their capacity. In Europe, Penn expects the semiconductor market to grow 6.3 per cent this year.


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