By Cho Jin-seo
Staff Reporter
Memory chipmakers are expected to show their worst quarterly performances in the second quarter of the year, with only a slim hope of recovery in the near future.
Prices of DRAM (dynamic random access memory) chips, the main cash cow of chipmakers such as Samsung Electronics and Hynix Semiconductor, have been stagnant after they reached record-low levels in late May. Though some analysts believe that the worst has already passed and the market may start to bottom out, manufacturers say that it is too early to draw a rosy picture.
``Many believe that the DRAM market had its worst season in the second quarter and it should be better in the third quarter, since demand tends to go up during the back-to-school season. But there is no guarantee for such a prediction,'' Kim Jong-kap, CEO of Hynix, told The Korea Times on Monday.
``Basically, the glut in the DRAM market will continue in the third quarter,'' CJ Investment & Securities analyst Song Myung-sup said in a report. Song said that supply from manufacturers has exceeded consumer demand by 14.2 percent in the second quarter, and the oversupply ratio will remain at over 6.5 percent in the next three months.
Samsung Electronics and Hynix are the world's two largest makers of DRAM and flash memory chips. They have suffered from plummeting product prices throughout the year. According to market researcher DRAMeXchange, the benchmark DDR 512Mb 533 MHz chip was traded at around $5 per unit last year, but its price has plunged to a record-low of $1.68 on May 22.
To minimize the damage from falling prices, the two companies allegedly have reduced their chip supplies since May. But the benchmark price is still hovering near $1.80 with little sign of recovery in demand. Market watchers say the semiconductor industry is likely to remain sluggish this year than was predicted before. Gartner has lowered its 2007 worldwide semiconductor market forecast to a modest 2.5 percent increase from 2006, from its previous forecast of a 6.4 percent gain.
``The makers' inventory level will continue to grow at least until July, so the DRAM price won't surge in the near future until the firms' inventories reach a healthy level,'' CJ's Song said.
Misjudging the effect of Microsoft's launching of its new Windows Vista, chipmakers had increased their manufacturing capabilities from late last year as they believed consumers would rush to stores to upgrade their PCs with larger, faster memory chips. Though such a demand explosion has never occurred, Hynix's Kim said, the Vista boom will certainly arrive someday.
``Vista has yet to make a significant contribution to the growth of the chip market. Someday it will do, though we can't tell when it will be,'' he said.