Severity of DRAM price fall is debated
Purchasing staff -- Purchasing, 3/7/2005 10:40:00 AM
A 25% drop in world computer memory chip prices is likely to depreciate further, suggest analysts who reject the notion (postulated by South Korea's Samsung Electronics) that the slippage is temporary and not about to deepen. Merrill Lynch analyst Simon Woo in New York, for example, says the fall in U.S. market prices of benchmark-grade dynamic random access memory in the U.S. has been particularly sharp since January, amounting to 30%.
DRAMs traded Friday at $2.90 per unit, down 25% from $3.84 at the end of 2004, according to online microchip broker DRAMexchange.com, Merrill Lynch is forecasting average sales prices for U.S. DRAMs this year at $3.70, down from $4.10 in 2004. Analysts say it costs roughly $3 to make the chips and expect prices to continue to fall towards the third quarter due to weaker-than-expected demand. South Korea's Hynix Semiconductor, the world's second-largest memory maker, and Taiwan's Powerchip Semiconductor admit weak demand for chips has triggered a faster-than-expected fall in prices. Neither U.S.-based Micron Technology nor Germany's Infineon Technologies have been particularly bullish on memory chips lately. Upshot: Roger Lin, deputy research manager at Taiwan's Pacific Securities, says, "We don't see a turnaround until late April or early May at the earliest." Lin says prices could fall as low as $2.50 in April. "We believe the overall trend for DRAM prices is likely to remain weak until late summer," the Merrill Lynch analyst says in a note. On the other hand, "We see the fall in DRAM chip prices as temporary,” Lee Yoon-woo, vice chairman of Samsung Electronics, the world’s largest producer, tells the Reuters News Service on the sidelines of a business conference in Seoul. Lee, who previously led Samsung's semiconductor division before being promoted to a vice chairman, adds: “We expect the price to stabilize at around $3."
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