DRAM: Korea cuts supply, Texas Instruments in talks

DRAM: Korea cuts supply, Texas Instruments in talks
Disastrous May for Korean chip firms could lead to production cuts; Texas Instruments may pull out of memories, Fujitsu to stop DRAM production in UK as price hits deep. David Manners. The Korean semiconductor saga saw May exports showing a surprise drop, the Korean government announcing a $4bn export promotion programme and the chip companies planning production cuts to boost prices. Countering the export promotion project is this Friday’s meeting of the World Semiconductor Forum in Tokyo, at which a US-sponsored resolution forbidding the Korean government to spend IMF funds on chip manufacturing may be implemented. Production cuts have, so far, only been implemented by Hyundai but Samsung will suspend production for seven days from June 14, and LG is expected to follow suit. Everyone recognises that having an 18 per cent excess of supply over demand of DRAM is responsible for the low prices. James Hone from the DRAM price-tracking service, ICIS-LOR, said the contract price for PC66 64Mbit DRAM is $9, and the spot price is $8. For PC100, the 64Mbit spot price is $10. A big cut in production at the three Korean companies could see the price bounce to $15. However, the Koreans are worried that, if they cut back production, the Taiwanese and Micron Technology of the US will ramp up production to make up the shortfall. The Asian crisis is expected to have a severe effect on this year’s world semiconductor market with the US Semiconductor Industry Association now expecting a 1.8 per cent decline to $134.6bn after a forecast of 16.8 per cent growth earlier in the year. This is backed up by Semico Research of Phoenix predicting that the industry will decline by one per cent this year. 1998 DRAM revenues are expected to fall by 26.6 per cent to $14.5bn (1995’s DRAM revenues were worth $40bn). It’s crunch time for memory makers. Texas Instruments (TI) could be the first major producer to pull out of the business while Fujitsu is to stop making DRAMs at its English plant. Rumours that TI is preparing to move out of memories have been around for six months, with the company disengaging from two joint DRAM manufacturing operations with Acer and Hitachi and from a joint gigabit DRAM R&D collaboration. It has made little impact in the 64Mbit market. Now, sources close to TI report that Micron Technology has met with TI representatives about purchasing TI’s memory chip business which represents about 25 per cent of revenues. A price tag of around $1.5bn has been mooted. Fujitsu has decided not to make 16Mbit memories, which now sell for under $1, at its Durham fab which it is turning over to logic. The moves come after three successive years in which the value of the DRAM market has declined. In 1995, the DRAM market was worth $40bn. This year it is expected to be worth half that. But the unit shipments have been doubling every year. “This year the crunch comes,” says Malcolm Penn, of analysts Future Horizons.


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