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By YUN-HEE KIM
HONG KONG—Computer-memory chip makers expect to see their fortunes improve next year after two tough years, allowing them to boost capital spending to improve their technology.
Samsung Electronics' wafer is displayed at the company's mobile-solutions
forum in Taipei in September.
Industry heavyweights and observers see the notoriously up-and-down industry turning positive this year. Weak capital investments over the past two years have led to a gradual decrease in global supply of dynamic random access memory chips, which are the main chips used to store data in personal computers. The decrease in supply, coupled with improving demand, has led to a recovery in prices of DRAM chips in recent months.
The launch of the new Windows 7 operating system from Microsoft Corp. may also prompt consumers and corporations to replace their aging computers with new ones that require more memory storage next year, providing a much needed demand boost for DRAM makers.
The recovery in the DRAM market, while a sign that demand in the electronics supply chain is improving, could put pressure on PC manufacturers to trim their component costs to maintain margins.
It could also be bad news for consumers. PC makers typically lower the amount of DRAM chips they use per system when prices increase to compensate for higher prices. That could affect the performance of the PC and the overall cost.
Daiwa Securities expects shipments of personal computers to rise 13% in 2010 and smart phones, which also use DRAM chips, to jump 55% from 2009.
"We expect 2010 to be a strong year for the industry, as we forecast increases in shipments" of personal computers and smart phones, Daiwa analyst Jae H. Lee said.
Researcher Gartner expects revenue in the global DRAM industry to increase by 25% next year to US$29.1 billion. That would be a sharp improvement from an 11.5% decline in global DRAM revenue of US$21.6 billion estimated for this year.
Andrew Norwood, research vice president for semiconductors at Gartner, forecasts average DRAM selling prices to decline about 8% next year, much milder than the 30% decline the industry typically sees annually.
The average spot price of the most widely used DRAM chip—a one gigabit double data rate two chip that runs at 667 megahertz—fetched $2.53 each early Monday, up from $2.29 each on Dec. 21, according to Taiwan-based online chip clearinghouse DRAMeXchange.
In a sign of confidence in the industry's recovery, most chip makers have plans to raise their capital spending.
Samsung Electronics Co. the world's biggest DRAM maker by revenue, said it plans to boost capital spending next year from an estimated 7 trillion South Korean won (US$5.95 billion) in 2009, without disclosing specific figures. Second-ranked Hynix Semiconductor Inc. plans to more than double its capital expenditure in 2010 to about 2.3 trillion won, while Japan's Elpida Memory Inc. plans to boost spending to about $600 million from almost US$500 million for its current fiscal year ending in March 2010.
Citigroup estimates global memory-chip capital spending will more than double next year to about $14.8 billion as companies upgrade their technology at existing manufacturing facilities.
The brokerage has "buy" ratings on Samsung and Hynix, but has "sell" ratings on Taiwan's DRAM companies Inotera Memories Inc., Nanya Technology Corp. and Powerchip Semiconductor Corp., citing their weak competitiveness.
Keen to maintain Taiwan's competitiveness in DRAM production, the island's government formed Taiwan Memory Co. in July to possibly consolidate weaker players under the company and is seeking to jointly develop key technologies with Japan's Elpida. Many of Taiwan's DRAM makers have been struggling to pay down their debt after suffering from a cash crunch.
"Some of the smaller Taiwanese players will struggle to move to 50-nanometer technology...these vendors could find it increasingly difficult to keep pace with cost reductions in the industry in second half of 2010," said Mr. Norwood.
A chip's transistor components and the spaces between them are measured in nanometers. The smaller and more closely transistors can be packed together, the more powerful the chip.
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