Posted : 2010-02-23 17:13
Updated : 2010-02-23 17:13

Samsung Worried Over Chip Bubble

Kwon Oh-hyun
president of Samsung Electronics’ chip business
By Kim Yoo-chul
Staff Reporter

Samsung Electronics has stepped back from its previous bullish outlook for the global computer memory chip market.

The industry leader is worried over a possible bubble in the sector, citing signs of a demand and supply mismatch.

The top executive of Samsung's semiconductor business said Tuesday that the company was hesitating over additional investment due to growing uncertainties on the demand side.

"It is true that the sector is getting hotter and hotter. But it is premature to say the market will continue the current upbeat mood throughout this year," Kwon Oh-hyun told The Korea Times.

Kwon was speaking on the sidelines of an industry forum held at the InterContinental Hotel, southern Seoul.

"The first quarter is a traditionally seasonally weak season for chipmakers in demand. Thanks to the Winter Olympics, demand has been healthy. But that doesn't guarantee an escalation of demand compared with supply," said the top executive.

The cautious stance is a reflection of a change in outlook in the market. Robert Yi, the chief of Samsung's investor relations team, said months ago that the supply and demand conditions should remain tight due to a limited increase in production.

DRAM chips are widely used in traditional PCs. NAND flash memory chips care used to store data in electronic devices even when power is switched off, making them ideal for music players, digital cameras and smartphones.

Samsung is the leader in both sectors. Usually, demand is strong in the latter half of the year as consumers are buying more chip-embedded gadgets for fall semesters and year-end events.

Kwon said the second quarter would be the turning point to get a clearer view on whether a bubble was forming.

"That's why Samsung is hesitating on additional chip investment. We will see what happens in the sector during the second quarter," he said.

The company has already been cautious about more investment, and remained quiet over further financial details.

Samsung, which had fixed its investment for 2010 at 5.5 trillion won, is known to be considering adding 3 trillion won.

It is internally reviewing the possibility of building another chip line in Giheung, Gyeonggi Province, although Kwon declined to comment.

"Again, we will decide on further investment after the second quarter."

When asked about whether Apple's new iPad will boost the memory chip market this year, the executive said he is worrying about an overreaction.

"I read newspapers about the 'iPad effect' on the global flash memory chip market. I have a question. What will that be?"

Sector leaders, including Samsung, Toshiba of Japan and Hynix Semiconductor, are all providing chips to Apple. All of them have high hopes about growth forecasts this year as Apple is known to be cutting the price of the iPad for strategic reasons.

But analysts say risky factors still remain for chip vendors as any decline in global economic conditions would dampen NAND flash chip sales as the market is heavily dependent on demand for consumer electronics.
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