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Computer chip market feeling global pinch

The world's semiconductor market is tumbling due to the slowdown in the global economy, and prices show no sign of hitting bottom.

These woes are affecting not only memory chips, the sales of which are influenced greatly by supply-demand factors, but also for system large-scale integration (LSI) chips.

The chip market doldrums are starting to sap chip makers of their vigor and could affect the allocation of huge investments needed to develop next-generation semiconductors.

The so-called silicon cycle trend for the semiconductor market roughly follows a four-year boom-bust cycle. In the past decade, 2000 and 2004, coincidentally Summer Olympic years, corresponded to boom years. But the industry's expectations for this Olympic year have been dashed.

"The chip market will hit bottom sooner or later," said Yukio Sakamoto, president of Elpida Memory Inc., a leading manufacturer of dynamic random access memory (DRAM) chips. "It's hardly conceivable in light of the past history of market trends that a recession will continue for two years," he added. Sakamoto made such a bullish prediction during a briefing session for investors on Sept. 9.

DRAM prices, which have been skidding sharply since last autumn, saw a fall of about 15 percent for this year's July-September period compared with last year's October-December quarter.

Elpida has decided to cut DRAM production at its Hiroshima plant by 10 percent, the first time the company had made such a decision since its establishment in 1999. This is primarily because demand for DRAM used in personal computers installed with the Windows Vista operating system has not met expectations, an analyst said.

The prices of memory cards and built-in NAND-type flash memories for digital cameras dropped by about 60 percent year-on-year from the July-September period in 2007. The sharp decline is attributable to the poor sales of digital products caused by a business slowdown in industrialized countries.

Toshiba Corp. on Friday announced that its business results would be in the red for its midterm settlement ending in September due to the price for memory chips dropping by a greater margin than anticipated.

The demand for system LSI chips also has been going down sharply in the cell phone sector because of a change in mobile phone sales methods.

The potential impact of these low prices could affect profitability and investment in developing next-generation semiconductors, which could spark a realignment of the semiconductor industry.

Miniaturization technology, which strives to put as many integrated circuits as possible in a limited space, must be promoted to develop next-generation semiconductors. The cost for development and production of such semiconductors is estimated to be more than 100 billion yen a year.

Business tie-ups intended for splitting development expenses are likely to be accelerated, market watchers say. Elpida's Sakamoto mentioned the possibility that one or two of the eight major DRAM makers might withdraw from the market.

release time :9/23/2008
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