by Anna Filatova
07/22/2002 | 07:24 PM
The shortages in the DDR memory market are about to stay there for at least 2 months, and it means that the prices will keep growing up. This conclusion is based on the recently made announcements of Nanya Technology vice-president and the latest moves undertaken by Hynix and aimed at the re-equipment of the production lines. Although Nanya is a relatively small memory maker with not very big market share, the problems they faced are typical of the entire industry. We are talking about the mass migration to the production of DDR memory. And the problem lies not with the absence of the chips, though this is also becoming more and more noticeable, but with the difficulty of the migration procedure. Everybody is modifying the existing SDRAM production lines for the DDR manufacturing, which of course causes the lines temporary closing. As a result the overall production capacities get worse, which leads to inevitable shortages. This way, the PC makers have no change to withstand the trouble, because they don’t have the DDR modules and also cannot get SDRAM modules as the production lines have already been stopped.
Of course, this situation first of all affects the smaller manufacturers. They have limited production capacities, that is why stopping a line results into significant volume losses. On the other hand, most larger manufacturers have already shifted to DDR in the beginning of the year without much trouble. Neither they, nor the market suffered: the price of PC133 SDRAM chips didn’t rise that much. This way we see that even the changes in the smaller companies can have a certain effect on the pricing, though they are very unlikely to ever cause a tangible reaction of the memory market. The larger companies and their policies are completely different. Last month, for instance, Hynix started renovating the stuff. This is when the market situation got really influenced. However, you shouldn’t disregard the stock, which has become considerably bigger during the not very profitable times. The goods in stock can serve to combat the shortages. Besides, this factor will not last ever?<%BANNER[article]%>
So, we have just discovered that the re-equipment of the production lines is not a determinative affecting the memory market that much. However, many analysts (including us :) still believe that the prices will rush up in the evening. And here the things that do not depend on the memory makers start mattering: take for instance the status of the world economy. The world’s recession and crisis in the IT industry are about to get over. The companies’ expenses for the hardware and software do not get any lower, and should even grow up in the end of the year. As a result, the PC sales increase together with the demand for memory.
To prove my point I would like to offer you two pieces of evidence The first one is the already mentioned statement by Micron CEO, Steve Appleton, about Micron being ready for the negotiations with Hynix. And the second one is the statement of the Micron sales director, Mike Sadler, about the positive forecasts for the further PC market development, which will push them to increase the contract memory prices as well. On the other hand, Micron is trying to be very careful about the memory, although they are ready to increase the production. So, the company is performing business diversification now. Micron is going to enlarge its product range with the new solutions based on their memory technologies, though we don’t know any details about the new products yet. One thing is clear: the demand will grow more stable than it was for the memory, otherwise the diversification will not be a justified action. Another memory maker, Hynix, which has already realized that the situation improves, is very unwilling to speak about selling the Micron production. If the prices grow as high as $4 for a 128Mbit chip, Hynix claims they will be able to survive themselves. Moreover, Hynix is pretty much sure of the success. If things were different, Hynix could have already been sold, and Micron wouldn’t be so anxious to buy it.
Watching the today’s memory market, we can say that most manufacturers are kind of uncertain. It allows us to conclude that the situation with the memory will clear up for a considerable while. Namely, the following questions will be answered: will the demand for PC grow up and will Hynix remain independent, i.e. will they give up the idea of selling it. If everything goes the way it should, the memory prices will rise, sharp fluctuations will be not so frequent, and the prices will be reduced in proportion to the PC demand, which in its turn depends on the world’s economics.