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Chip companies building DRAM at a loss, says analyst

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A year ago Posted 22 July 1998 -- a year ago The DRAM market has now reached the stage where major manufacturers are making products at below cost, and hoping for a miracle, a senior analyst at Dataquest said today. Richard Gordon, who works for Dataquest UK, said that prices of memory products have continued to slump during the first half of this year and that there is little prospect of a turnaround, except in specialised areas, even in 1999. Gordon said: "There is a general perception that manufacturers are making chips below cost and there are a lot of people with their fingers crossed. At the end of this year there will be some tightening on the PC 100 front." He said that from the spare capacity point of view, 1999 looked little better. "All through this year, we've seen the price decline continuing," he said. "If you look at contract pricing for 64 megabit parts it's between $8 and $9." Such parts cost around $8.50 to manufacture, Gordon said. Nor do steps different manufacturers are taking to fix the problem having much effect, he said. South Korean company Samsung said earlier this year that it would shut down production for one week in four, but Gordon said that it was unclear what this meant in practice. "You can't just shut a fab on or off," he said. Dataquest, he said, was watching developments in South Korea carefully. He thought it was still likely that there would be an agreement between Samsung, LG Semicon and Hyundai in which one of the three chaebols would take over the others' DRAM manufacturing. "The International Monetary Fund (IMF) is overshadowing the whole situation in Korea by dangling money in front of the government. I suspect something will happen to those three companies sooner or later," he said. ®

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