Scene on Vista and Korea's chipmakers

by Ellie JY

Microsoft’s new window operating system Vista is to be a blessing for Korean chipmakers for the next year with an expected demand hike for DRAM(dynamic random access memory).

“Samsung and Hynix both will benefit greatly from VISTA,” said Chung Chang-won, IT analyst at Daewoo Securities Co. “I expect the DRAM market to be very bullish in the first half of next year and a little downward into the second half, and vice versa for flash memory, so either way the year 2007 will be very good for both Samsung and Hynix.”

Samsung, the world’s largest memory chip maker with 31.2 per cent of DRAM market share, expects the launch of Vista will expand the global DRAM market by 17 per cent in 2007 to be worth around $35 bn.

Chu Woo-sik, senior vice president of investor relations at Samsung Electronics Co., said at Samsung Tech Forum held on November 13 that the launch of Windows Vista would increase memory consumption per PC from 0.8 GB to 1.2GB. Accordingly the company will strength the DRAM business with higher than industry average bit growth of 65 per cent next year, he said.

The company expects its ‘Vista-ready’ PC shipment will see a 13 per cent increase in the fourth quarter compared to the third quarter, and the shipment would grow more than 90 per cent next year.

Hynix, which takes up about 16.3 per cent of world DRAM market, also paints a very rosy picture for 2007.

The company told to the FT that the launch of Vista would have a very positive impact on company’s earnings and sales, especially given DRAM sales in the third quarter accounted for almost about 70 per cent of the company’s total sale.

It predicts demand for DRAM will increase by 55-60 per cent next year.

In an effort to meet the increasing market demand, Hynix is set to increase facility investment to $4.6bn by the end of this year, up by $0.75 bn from originally planned. Next year will be similar.

Samsung also revised up the original budget for semiconductor production facility investment in the year 2006 to $7bn from $6bn, according to Samsung’s statement out in October.

Some industry experts, however, voice concern that world’s big chipmakers’ plan for aggressive production facility expansion is likely to trigger other chipmakers to follow suit, which might result in over-competition and a DRAM market slowdown.

Cho Nam-yong, Samsung’s executive vice president of memory sales and marketing expressed his concern when he met reporters last month that other chipmakers would rush to the market, resulting in oversupply.

“A little bit of oversupply is better for the industry,” an analyst in Seoul, who asked not to be named, told the FT.

“Even if oversupply materializes in the first half of next year and drives down the price by about 30 per cent, demand for the second half will offset the price reduction,” he said.

Park Young-ju, analyst at Woori Securities Co., said the overall prospect for DRAM market is very upbeat despite concern for excessive output.

“Even if DRAM prices go down with increasing supply, that won’t have much impact on chipmakers as long as demand remains strong, which will surely be the case, because the cost for chip production is fixed.”