Posted : 2009-06-12 17:04
Updated : 2009-06-12 17:04

Hynix to Hike Chip Price by 10% in June

By Kim Yoo-chul
Staff Reporter

Hynix Semiconductor plans to raise its contract price for dynamic random access memory chips (DRAMs) by an additional 10 percent later this month on signs of increased demand, a high-ranking industry source said Friday.

"Hynix is positive over the result," the source told the Korea Times, adding the company had already asked its key clients to pay 10 percent more for its chips in the first 15 days of June.

The source declined to be identified citing the sensitivity of the issue. Kim Jung-soo, chief of investor relations for the world's No. 2 producer of computer memory chips, also declined to comment.

DRAM makers usually negotiate their contract prices twice a month with PC manufacturers. DRAM chips are widely used in computing-related devices.

The contract prices are significant for chipmakers in gauging profitability.

According to Hynix sources, the company has been raising its DRAM prices by 10 percent every month since March.

If PC makers accept the increase, then the average selling price of Hynix' benchmark 1-gigabit double-data-rate-two (DDR2) chip is expected to reach about $1.40 by the end of June, the company source added.

"When the benchmark chip price reaches the $1.50 level, then South Korean chipmakers can post profits, while that level is a break-even-point for their struggling Taiwanese rivals," according to another high-ranking source.

Industry leader Samsung Electronics said there was a possibility they may follow suit but its spokesman refused to give any details.

Contract prices for DRAM chips started rising in the second half of April, with Hynix and Japan's Elpida Memory being the most eager to drive up prices.

Expectations are running high that the global demand for PCs will steadily rise in the second half of this year owing to the rising popularity of budget PCs.

"The industry's consolidation moves, reducing inventories, an introduction of Microsoft's new Windows operating system and good sales of e-books are positive factors," local brokerage Shinyoung Securities said.

But some watchers say it's too early to predict a fundamental turnaround in the global chip industry as the demand for PCs and other electronic devices is still sluggish.

Market research firm iSuppli said global chip sales of both DRAM and NAND flash memories declined 14.3 percent in the first quarter of this year.

Hynix is expected to lower operating losses to below 200 billion won in the second quarter by raising its chip prices. It suffered 515 billion won in operating losses in the first three months of this year.

Samsung Electronics, which remained in the red for a second straight quarter, is also forecast to slash losses.

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