Samsung, Hynix Differ on Chip Outlook
By Kim Yoo-chul
Samsung Electronics and Hynix Semiconductor are clashing over the outlook of the global chip market for 2010.
The world's top two chip makers each reiterated their bullish stance toward the market for this year. But Hynix expressed a slight concern regarding oversupply at a time when rivals are ramping up their production.
"Still, the overall outlook in the chip sector seems to be fine. The sector is expected to maintain its current healthy condition for the remainder of the year despite some worries about oversupply," Kwon Oh-hyun, president of Samsung Electronics' memory chip division, said last week.
The remarks came as overseas producers such as Elpida Memory of Japan and Micron Technology of the United States are increasing their production as the recovering global economy is rejuvenating corporate demand for personal computers.
Analysts and some Samsung insiders say the global chip industry could face an oversupply situation sometime in the latter half of this year due to capacity expansion by chipmakers.
When asked for further details, the Samsung executive declined to elaborate.
Samsung Electronics plans to invest over 5.5 trillion won in memory chips, including DRAMs and NAND flashes, inspired by higher sales of digital devices and other consumer gadgets. Memory chips are used in PCs, smartphones and high-end portable devices.
In contrast, Kim Jong-kap, CEO of Hynix Semiconductor, said, "Hynix is slightly worried about an oversupply of DRAM memory chips, though it is still positive on the demand for NAND flash memory."
Hynix is the runner-up to Samsung Electronics in the global DRAM memory chip industry, and the world's No. 3 producer of NAND flash memory chips.
"The demand for memory chips will steadily rise, capitalizing on mobile products. But there are still some concerns about oversupply when it comes to DRAMs," Kim added.
Limited Supply Growth, Rivals Attack
Despite the divergence in opinion when it comes to oversupply, supply growth will be limited as chipmakers are refraining from making new investments in the aftermath of the worldwide financial crisis.
"The memory chip market will experience a short-term slower demand, causing chip prices to fall. But Samsung and Hynix will maintain their current competitive edge thanks to better chip-making technology compared to their overseas rivals," Park Hyun, an analyst at Prudential Investment, said.
But the South Korean companies may be hard pressed to maintain their competitive edge when it comes to thinner technologies at a time when their overseas rivals areadvancing in this regard, analysts and company officials say.
Samsung relinquished its position as the leader in the global flash memory industry, in terms of having the smallest device, after Intel and Micron announced the world's first 25-nanometer NAND technology, which is better than Samsung's 32-nanometer technology.
Meanwhile, Elpida, the Japanese computer chip maker, is speeding up the development of advanced 40-nanometer processing technology after nullifying its earlier development plan for 50-nanometer technology.
"Samsung is planning to introduce a flash memory with 27-nanometer technology soon," a Samsung Electronics spokesman said. Hynix is currently planning to launch 26-nanometer flash technology.
Flash technology is a barometer for a chipmaker's manufacturing skills. Today's semiconductor chips have millions of minuscule electronic circuits, which are etched onto a silicon disk on a nanometer (one billionth of a meter) scale.
A smaller measurement means that the chip circuit consists of thinner electric lines, thereby housing more circuits and storage in the same amount of space. Such an advantage significantly lowers production costs.
Data from DRAMeXchange, a market research firm, shows that the market share of Samsung Electronics in the DRAM industry was 31.7 percent in the fourth quarter of last year, down 3.9 percent from the previous quarter.
The comparable portion for Hynix remained unchanged at 21.6 percent on a quarter-on-quarter basis.
The world's No. 3 Elpida increased its share by 2.6 percent to 19.4 percent during the last three months of 2009, while Micron Technology, Taiwan's Nanya and PowerChip also saw an increase of the market share, according to the firm.
"The war over market share will intensify as time goes by, raising concerns about oversupply. But, it is still premature to talk about lower demand," Park of Prudential said.