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Samsung drive may halt DRAM market recovery

Reuters

Published: 06 May 2008 09:54 BST

Hynix Semiconductor, the world's number-two maker of memory chips, said on Monday that it raised contract prices for computer memory chips by about 15 percent in April and expected further increases in May.

The healthy price gain confirmed the DRAM market has bottomed out after a 15-month slump, but analysts said a recovery this year could be short-lived due to a production drive by sector leader Samsung Electronics.

Makers of DRAM, after reeling from over-production and slower PC demand, have pinned their hopes on spending cutbacks from cash-starved makers and improving demand ahead of the start of the new school year and the year-end shopping season.

"We have raised prices around 15 percent in April," said James Kim, vice president in charge of investor relations at Hynix.

Kim did not provide a breakdown of the increases between the first and latter half of April. He said previously that the DRAM contract price hike for early April was "minimal."

"We have expectations," Kim said, when asked about the prospect of price increases in May.

Japan's Elpida Memory also raised prices of DRAM chips, mainly used in personal computers, by between five and 10 percent in the first half of April. Samsung did not comment on its chip prices but analysts believe it also raised prices in April.

Samsung drive
Kim declined to comment on bigger rival Samsung's plan to aggressively increase DRAM shipments.

Samsung said in late April that the company was aiming to double DRAM unit shipments this year, higher than previous market expectations of between 70 and 80 percent growth. Analysts said the plan could extend the DRAM market's oversupply and add to pressure on smaller rivals such as Hynix.

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"The new scenario leads to a weaker recovery in DRAM prices, which means few makers will be able to finance investment with their own cash flow by the end of this year," said Jay Kim, an analyst at Hyundai Securities.

"Sluggish investment by rivals will help Samsung raise its dominance in the market."

DRAM prices are expected to start falling again in the fourth quarter, after limited gains in the second and third quarter, Kim said.

Samsung had 30.6 percent of the global DRAM market revenue in the first quarter, according to research firm iSuppli. Hynix and Elpida Memory followed with 18.6 percent and 14.5 percent respectively.