Micron reports continued semiconductor price plunge

Continued DRAM and NAND price declines could impact chipmaker's capital spending plans

By Dave Hannon -- Purchasing, 12/31/2007 6:39:00 AM

U.S.-based semiconductor maker Micron Technology reported continued declines in average selling prices for its memory chips, leading market watchers to question its 2008 spending and expansion plans.

Micron CEO Steve Appleton said recently DRAM prices plunged 20% in the quarter ending Nov. 29, while NAND flash prices fell 30% in the same period. And Micron officials said NAND flash prices have already fallen 40% in three weeks since its last quarter closed.

“We're feeling the effects of what was a pretty big expansion year in 2007,” Appleton said on a conference call with analysts reported by Bloomberg. “Output is probably peaking.”

Kevin Vassily, an analyst at Portland, Oregon-based Pacific Crest Securities says in the Bloomberg report that chip prices are likely to go down further. “That's just not going to get these guys out of loss-making mode any time soon."

If memory chip prices remain low, Micron’s $2.5 billion in predicted capital equipment spending in 2008 could be slashed, analysts say.

"[Micron's] focus will be more on the average selling price decline and their ability to reduce costs," said American Technology Research analyst Doug Freedman in a Reuters report. "The question high in my mind is how important is their capital spending to lowering costs."

Market researcher Gartner Inc. recently forecast that semiconductor capital equipment spending will drop 10% in 2008.

See also: Chip companies to reduce investment in new capacity