S. Korean chipmakers to solidify leadership amid DRAM price hike

By Kim Young-gyo
SEOUL, Aug. 21 (Yonhap) -- South Korean chipmakers will likely solidify their
leadership while the prices of dynamic random access memory (DRAM) chips are on
the rebound, analysts said Friday.
The Taipei-based Dramexchange Technology Inc., the operator of Asia's biggest
spot market for chips, said early in the day that the price of the benchmark DDR2
DRAM chip soared to US$1.41 as of Thursday, a 74.1 percent rise compared to
January when, it hit bottom at $0.81.
The price of a DDR3 DRAM chip, the improvement on its predecessor, the DDR2 DRAM
chip, rose 77.2 percent to $1.56 four months after it reached a low of $0.88.
DRAM chips are used in most personal computers and other electronic devices, such
as mobile phones.
As demand for personal computers, especially laptop computers, is growing along
with signs of economic recovery, it will have a positive impact on Samsung
Electronics Co. and Hynix Semiconductor Co., which have a technological edge over
their global competitors.
"Samsung and Hynix are so far the largest suppliers of DDR3 DRAM chips," said Seo
Won-suk, an analyst at NH Investment & Securities.
Seo expects the demand for the most advanced DRAM chips will grow by 19 percent
in the third quarter and 8 percent in last quarter.
"A delay is expected for other chip makers to catch up with the South Korean chip
makers, as they will have to adjust their production lines to be more suitable
for the DDR3 DRAM chips," Seo said.
DDR3 DRAM is twice as fast as DDR2 DRAM and reduces energy consumption by 30
percent.
While semiconductor manufacturers coordinate their production plans in order to
meet demand, they will have to scale back production of older versions of DRAM
chips, analysts said, adding that it will also control the price of DRAM chips
overall.
"Samsung Electronics' recent announcement on closure of a DRAM production line in
Austin, Texas, was actually a good news for the DRAM industry as a whole," said
Han Seung-hoon, an analyst at Korea Investment. "Samsung implicitly showed that
the DRAM price is still low."
Samsung Electronics said earlier this week it will stop operating a DRAM
production line in the United States in October in order to expand its production
of NAND flash memory chips. The production line, built in 1997, is estimated to
account for 2 percent of the world's total annual production of DRAM chips.
Other chipmakers are expected to follow suit, shutting down production lines or
reducing output in order to maximize profit margins.
Analysts here offered an upbeat outlook for the South Korean manufacturers, as
the market situation will continue driving up the price.
They expected Samsung will report an operating profit of over 1 trillion won
(US$8 billion) in its semiconductor business, while Hynix will be in the black
again.
Samsung's operating profit reached 240 billion won in the semiconductor business
in the second quarter, when the DDR2 chip was back to one dollar. It reported a
loss of 670 billion won in the first quarter when the price was 0.8 dollar.
Hynix halved its operating loss in the second quarter to 210 billion won from 515
billion won in the first quarter.
According to statistics from the global market researcher iSuppli, the global
DRAM market grew 34 percent to $4.5 billion in the April-June period, while
shipment grew by 14 percent.
Samsung had a 34.1 percent share and Hynix had a 21.7 percent share in the global
DRAM market during the same period. Their combined market share was a record high
at 55.5 percent in the first quarter.
"With rising demand and limited supply for DDR3, the global DRAM industry is set
for a sustainable recovery that will extend into the fourth quarter and pave the
way for a robust annual increase in 2010," said Kim Nam-hyung, chief analyst for
iSuppli.
ygkim@yna.co.kr
(END)