Posted : 2009-06-08 19:49
Updated : 2009-06-08 19:49

Chip Industry Recovery Remains Uncertain

Semiconductors are one of the top export items and its price movements greatly affect the trade account. Despite some signs of recovery, experts say it is premature to say that the chip industry is on a recovery path.
/ Korea Times File

By Kim Yoo-chul
Staff Reporter

Has the global memory chip industry hit bottom or is it still sliding?

It is hard to tell but one certain thing is that it may take more time for a meaningful recovery.

Some analysts are painting a positive outlook, citing a rebound in benchmark chip prices, reduced inventories and massive output cutbacks.

Now, shares of industry leader Samsung Electronics and runner-up Hynix Semiconductor are being referred to as the ``top picks'' by optimists.

According to the Korea Exchange (KRX), Samsung shares rose 22.4 percent in the first five months of this year, while Hynix's shares soared by 111.3 percent during the same period.

``Despite limited price upturns in chips, expectations were still high that industry leaders will trim operating losses in the second quarter and cash-strapped followers will exit,'' Daishin Securities, a local brokerage, wrote in a memo to clients Monday.

Samsung may ask its key PC-related clients to pay more. Hynix was looking for a chance to raise its contract-based chip prices for the second straight month.

The moves to raise these prices means the demand and supply imbalance is showing signs of stabilizing.

``For the time being, supplies are tight. Some PC makers have been known to strike a long-term contract deal with leading chip suppliers,'' another local brokerage IBK Securities said.

``For seasonal factors in the months to come, the tight supply in the global DRAM market is likely to continue, adding to a steady increase in chip prices and profits in chipmakers,'' the research house said.

But analysts say it's too early to predict full recovery with demand for PCs and other electronic devices still soft.

``Global sales declined 14.3 percent in the first quarter for both DRAM and NAND flash chips. Although sales are forecast to surge to a strong finish with 17.5 ― percent growth in the fourth quarter, that's only telling half of the story,'' Kim Nam Hyung, a chief analyst for iSuppli said.

``The oversupply situation will continue to be acute,'' he said.

Pessimists say Samsung and Hynix are nearly at break-even point.

``Expecting a fundamental recovery in demand is premature. Inventory reductions are mainly attributed to re-stocking. Therefore, imbalances continue,'' according to Kim.

Tokyo will invest in the new computer memory chip firm founded by Taipei to overhaul the entire memory chip sector.

This has raised worries of oversupply.

Some say the rising sales of e-books such as Amazon's Kindle is good news for chip makers that have been hit hard by the recession and dropping demand for PC-related products.

``Increasing sales of e-books can generate demand for other chips and electronic components,'' an executive from E-Ink told The Korea Times on the sidelines of a display show held in San Antonio, Texas last week.

``An early debut of Microsoft' new operating system Windows 7 may spur the demand for chips in PCs, creating room for chip makers to supply more,'' according to the executive.
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