Vultures circle DRAM producers

Who's it gonna be?

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Another week passes and the nail biting continues as the world (well, the DRAM world anyway) waits to see who going to be the first to fall.

Adding to the pressure, EBN reported Friday that Samsung was the latest company to take the industry to task, with what is usually a Steve Appleton (Micron's chairman) type assault. As the article says, "Financially irresponsible DRAM suppliers are being subsidised by government interests, trashing delicate pricing structures and upsetting the market's delicate balance."

Local memory reseller, Memory Plus, couldn't agree more. Marketing manager Steve Flack says he is praying that his Christmas present comes in the form of one of the big DRAM producers crash-and-burning, driving the memory price back out of the horrible pit it is stuck in at the moment. He says memory prices are so low now that the small price fluctuations that happen are not worth recording, it's down to pence bobbing up and down in the barely-flowing price stream.

Flack adds that if he was the betting type, his money would be on Hynix to fold first. DRAMeXchange concurs with this in its weekly round-up, saying the company is currently in the most exposed position. It adds that NEC and Toshiba are not in strong positions either, but that those companies are on their way out of the market (see our article on Toshiba and Infineon getting together).

The companies in question are trying their best not to show any weakness. As they are all competing on a base level here - pricing - none wish to slow down on their production, risking the loss of a price edge and, accordingly, market position.

Due to this, inventories are rising, possibly exacerbating and prolonging the pricing situation. AsiaBizTech reported last Wednesday that inventories have been growing, "as leading DRAM makers are still at full production ... the excess supply will likely persist at least during the first half of 2002".

In stronger positions are Samsung and Micron (allowing both of them to sound off at their weaker counterparts, as we see). Of course, no one is sitting pretty, with Samsung reporting today that its profits slid 75 per cent in the third quarter, mainly due to the state of memory prices.

Last week, we reported on Gartner's prediction of the DRAM market shrinking a further 19 per cent next year, following this year's 67 per cent slide and adding more dark clouds to an already gloomy sky for those in the game.

Of course, consumers are not very anxious for the blowout to come anytime soon as they revel in the cheapest memory prices anyone has ever seen. ®


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