By Kim Yoo-chul
Staff Reporter
Samsung Electronics said Tuesday it doesn't see any sign of a turnaround in demand for memory chips by the end of this year.
"It still remains highly uncertain over a meaningful turnaround in demand for consumer electronics products at least in 2009," Kwon Oh-hyun, head of Samsung Electronics' semiconductor division told reporters.
He was attending a general meeting hosted by the Korea Semiconductor Industry Association (KSIA) at Seoul Education Culture Center in Yangjae-dong, southern Seoul.
"I hope the second half will be better, however, it will be difficult to expect a drastic demand improvement due to faltering demand for PC-related devices," Kwon said, adding Samsung has also been in difficulty in the chip business in the current first quarter.
"A short rebound in chip prices will be possible in the latter half of this year, but that will be limited. The increase of chip prices in previous months is a technical correction due largely to production cuts by Japanese and Taiwanese chipmakers," Kwon said.
Asked about the impact by Elpida's possible alliances with three Taiwanese smaller chipmakers, Kwon said the tie-up will threaten Samsung "in the long-term."
Market research firm iSuppli said the proposed combination between Japan's Elpida and Taiwan players ― Powerchip Semiconductor, Rexchip Electronics and ProMOS Technologies ― would vie with Hynix Semiconductor for second place in sales.
Samsung is forecast to still dominate with 30 percent of the market even if the scenario is realized.
"We won't change our strategies. We will maintain consistency in research and development (R&D) budgets, regardless of market conditions for technology leadership," according to the top executive.
But he admitted Samsung has a plan to slash this year's investment in chips.
Earlier, The Korea Times reported the world's biggest computer memory chipmaker decided to cut its chip investment by as much as half to below three trillion won from last year's some 6.2 trillion won.
"We will maintain flexibility in facility investment," Kwon said.
Foreign investors were returning to Samsung Electronics and Hynix Semiconductor attracted by a price upturn in chips and technology prowess owned by the South Korean players.
But Kwon's negative remarks have been echoed by many analysts and industry watchers.
DRAM prices have crashed, losses are mounting, chip companies are desperate for cash, weaker players are being forced to exit the market and industry consolidation is gaining momentum, led by Japan's Elpida, as a last card for survival.
Five of the top 10 chip suppliers suffered sequential declines in their chip sales in the third quarter, including Samsung.
But in the fourth quarter, all of the top-10 saw their sales decline compared to the previous quarter, according to iSuppli, a market research firm.
On a question over detailed strategy to increase profitability in chip making, Kwon said his unit will complete the transformation process towards 12-inch wafer fabrication line from less-advanced 8-inch wafer facility in its 10th line in Gyeonggi Province by the end of the year.
"The foundry- or contract-based chip business is one of Samsung's next growth engines," according to Kwon.