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Taiwan DRAM makers anticipate strong 2007

Posted: 20 Dec 2006 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? memory? NAND flash? flash? flash memory?

Taiwan's club of second-tier DRAM suppliers is betting big on a strong memory market in 2007, as evidenced by the flurry of announcements regarding billion-dollar investments and deals to expand productionbut will sales live up to their expectations?

PowerChip Semiconductor Corp. of Taiwan and Japan's Elpida Memory Inc. last week announced a joint venture to build what the companies billed as the world's largest memory fab in the Central Taiwan Science Park. The joint venture, which will include PowerChip's $2.4 billion 300mm fab, now under construction, could bring investments of as much as $14 billion from the two companies over the next five years.

Taiwan's ProMOS Technologies and Nanya Technology Corp. are progressing with plans to spend $1.2 billion and $1.8 billion respectively on new 300mm DRAM fabs, and on making related upgrades to technology in 2007.

The Taiwanese suppliers' outlook for 2007 is generally more bullish than that of the tier-one DRAM suppliers, such as Samsung Electronics Co. Ltd and Hynix Semiconductor Inc. of South Korea. The main factor behind the Taiwanese suppliers' optimistic view is the arrival of Microsoft Corp.'s new Windows Vista operating system, iSuppli Corp. believes.

However, if Vista is not attractive enough to corporations and consumers to upgrade their DRAM content in PCs, or to buy new Vista-capable computers with more memory, then the Taiwanese DRAM suppliers may be burned by their aggressive spending in the coming year.

Global DRAM revenue is expected to expand at a much slower rate in 2007 than in 2006, iSuppli predicts. DRAM revenue will rise to $36.9 billion in 2007, up 11.3 percent from $33.2 billion in 2006 based on the market research firm's latest memory forecast. In contrast, DRAM revenue is expected to grow by an impressive 33.8 percent in 2006.

To hedge their market risk, Taiwan's DRAM suppliers are seeking to license or co-develop NAND flash technology to help them ease the cost burden if Vista is not widely accepted initially. If DRAM sales disappoint, the Taiwanese firms in the near future can shift production to NAND, a strategy that has been successful for Samsung and others.

These manufacturers also plan to hedge their risk by offering specialty DRAMs, such as graphic and mobile memories, with a target production date in 2008. In order to differentiate themselves from tier-one DRAM suppliers that boast state-of-the-art manufacturing technologies, the Taiwanese DRAM suppliers are attempting to leverage their excellent positions throughout the entire electronics supply chain.

These supply-chain assets include their tremendous fabless design resources, their back-end component suppliers and the memory module makers.

Furthermore, the Taiwanese DRAM makers are benefiting from more favorable government policies. The Taiwanese government has allowed domestic DRAM suppliers to transfer their older 200mm fab operations to China.

Such a policy will afford Taiwan's DRAM suppliers more flexibility in deploying their 200mm wafer fabs, giving them greater leeway in managing production resources and in product planning. It also means that Taiwan's DRAM suppliers eventually will have the same opportunities as foreign companies to address the Chinese market, and to take advantage of the mainland's advantage in low-cost labor. This is one small step that Taiwanese DRAM suppliers have been awaiting for many years.

- Ally Liao
iSuppli Corp.

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