| Taiwan DRAM Makers Optimistic About Market Rebound
April 3, 1998 (TAIPEI) -- Taiwan DRAM makers are optimistic about DRAM sales in
the second half of 1998, and they anticipate sound profit margins in 1999.
|Despite divergent outlooks by market analysts, two leading DRAM makers in Taiwan
-- Vanguard International Semiconductor Corp. (VIS) and Powerchip Semiconductor
Corp., both located in the Hsinchu Science-based Industrial Park -- showed
confidence that the volume of semiconductor businesses in the second half of
1998 will surpass that of the first half, and that profit margins will return to
a healthy level.
Due to a production glut, DRAM price nose-dived starting late 1995 following a
production growth of 74 percent per year from 1993 to 1995. Two consecutive
years of negative growth ensued: a 38.5 percent decrease in 1996 and a 21.2
percent drop in 1997.
Compared to the last semiconductor recession of 1984-1986, the past two years of
decline have been gentle to DRAM makers, according to Morris Chang, VIS's
chairman of the board. He said the cyclic mode is typical of any semiconductor
Frank C. Huang, chairman of Powerchip, holds a similar view. He said sales of
the to-be-launched Microsoft Windows 98 operating system and Intel AGP chip will
determine if demand for DRAM chips can drastically increase. He said DRAMs are
an application-oriented product; if there are breakthroughs in PC hardware and
software, the need for DRAMs will grow substantially. Therefore, he has a rosy
outlook about DRAM sales towards the second half of this year. He even
anticipates sizable growth in 1999.
Over the past year, many semiconductor makers in America, Japan and Korea have
postponed plans to expand DRAM production capacity. The Asian financial crisis
also kept Korean DRAM makers from borrowing to expand. Chang said this helped in
reaching a balance between supply and demand, but it will be unlikely for the
price to return to the high point of 1995. However, DRAM makers can look forward
to a fair profit margin as early as next year, he said.
Chang considers current DRAM prices at the bottom level. According to his
experience, a sound profit margin will come while the maker keeps elevating
processing technology and yields as long as DRAM prices remain stable.
"DRAM prices do not have to bounce back for us to make a profit," he said. For
example, when the unit price of a 16Mb DRAM has remained between US$2.50 and
But future profits are most likely to come from 64Mb DRAM chips. Chang said if
the unit price can maintain a US$10-US$13 level, the manufacturer will gain a
healthy profit simply by continuously reducing the costs. VIS President Fang
Churng Tseng echoed his view, saying one can sustain a good profit at a US$6
Regarding next-generation 256Mb DRAM chips, Tseng is taking a long-term view. He
said volume production may not materialize until 2001 due to extra challenges in
improving yields, the new tasks associated with 12-in, fabs and heavy capital
investment outlays. For the time being, he expects the glut to be over within a
year, when capacity expansion in 64Mb DRAMs slows and market demand grows
(Charlene Huang, Asia BizTech Correspondent)