By Jane Rickards in Taipei
Samsung Electronics foresees an oversupply of dynamic random access memory (D-Ram) chips in the fourth quarter of this year or the first quarter of next year if the PC market continues to slow, marking the latest twist in a tortuous saga of gluts and shortages.
Even for an industry renowned for its boom and bust cycles, the way the world’s supply of D-Ram chips has unpredictably swung from glut to shortage and back to glut again over the past two years makes any new forecast seem as reliable as those of fortune tellers hustling outside South Korean department stores or Taiwan’s ornate temples.
The most recent forecast? Glut, provided the PC market slows, said Kwon Oh-hyun, the head of Samsung’s IC business at a media conference in Taipei this week, according to Reuters. And many analysts think the PC market will slow, or at least be weaker than expected, due to the impact of devices like the iPad and US double-dip recession worries.
Samsung has also said prices for its memory chips will fall in the second half on concerns that China’s tightening monetary policy and the European debt crisis could hurt sales of computers and other electronic goods. Kwon’s remarks also came after Samsung in late July warned of weaker margins and profit growth after posting record quarterly earnings, with one reason for this falling chip prices.
But rewind less than six months and it’s shortage.
South Korean memory chip maker Hynix Semiconductor’s chief financial officer Kim Min-chul in April predicted that demand for its chips would remain strong throughout the year. The benchmark price of D-Ram chips rose 16 per cent in the first quarter of this year, after tripling in 2009, according to Dramexchange.
In January, Samsung, riding on the confidence of record sales for 2009, was also forecasting a D-Ram shortage throughout this year, amid expectations that the global recovery would boost PC demand. Taiwanese companies also reported shortages of D-Ram chips in January due to delays in ramping production.
But rewind a little further to the end of 2008 and it’s a glut again – the worst one ever in the almost-20-year-existence of the D-Ram industry.
At the time, over-expansion coincided with a sharp drop in demand for computers as a result of the economic downturn. The price of D-ram chips plummeted by more than half to below cost for most producers. The biggest manufacturers of D-Ram chips – based in Taiwan and South Korea – were forced to cut production aggressively.
Which, unsurprisingly, caused… a shortage.
