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Powerchip’s Chairman makes a point
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Desperate times mean desperate remarks from DRAM producers, especially
those in Taiwan such as Powerchip Semiconductor (PSC). Chairman Frank
Huang has been quoted
as saying that there is the likelihood of a DRAM shortage in the 3Q09, due to the level of production cuts announced by many
manufacturers.
I don’t think this is wishful thinking on Huang's part. In fact, he makes a very good point. PSC and ProMOS have made significant cutbacks due in part to the lack of funds as prices are below production costs. Qimonda will have halted all DRAM production by the end of the month and bit growth overall is minimal especially compared to the growth over the last few years.
As Q3 is the major sales period for DRAM, the cutbacks and lack of investment in production expansions - especially node migrations - could indeed see a strong rebound in prices as customers clamber to find supply.
Spot prices are already reacting to production cuts. Gartner noted in this week’s client newsletter that DRAM pricing ‘edged up’ last week. The rise was noted by Gartner at 6.5% compared with the previous week, standing at US$1.04 on a 1Gb equivalent basis.
However, the problem with Huang’s comments is that they don’t give the bigger picture or account for the actions of memory manufacturers. Interestingly, Gartner observed in the same newsletter that PC production (biggest consumer of DRAM) would not recover to sustainable levels until the third quarter of 2010. Consumer demand has not yet reached bottom, according to Gartner.
With inventories very lean, we should expect spikes in demand but not a real recovery, as well as a sign of returning demand by DRAM manufacturers. We all know they will turn the taps on as quickly as possible, as ASPs could, by then, spike to profitable levels. This of course could well lead to a price fall in 4Q and overhang into the first quarter of 2010 - basically where we are in '09.
Nice try, Huang, but until the real consolidation in the DRAM industry takes place and PSC is one of those needing to be consolidated, it looks like it's business as usual and that business isn’t sustainable!