Chip prices worry producers

Prices of dynamic random access memory chips have been falling steeply this year, and industry experts predict that Korea's leading export product will continue to struggle through the second quarter. Personal computer sales are even more sluggish than usual, and war fears over Iraq have also suppressed demand. Spot prices for the industry benchmark, a 256 megabit double-data rate DRAM memory chip with an operating speed of 266 megahertz, were at around $6 at the beginning of the year, according to Dram Exchange, an online clearing house for the chips. But the price of the chips now hovers around $3.70. Since last November, when the price hit $9, the memory chips have lost two-thirds of their value. "There is a high possibility that prices of memory chips will remain weak throughout the first half of the year," said Choi Seok-po, a semiconductor analysts at Woori Securities. "Spot prices could fall to under $3.50. If contract prices plunge to around $4, smaller firms could face a serious business crisis." Samsung Electronics Co. has devoted 70 percent of its chip production facilities to making these chips, and said it plans to shift some production to higher-priced products, such as memory chips for graphic cards and workstations. "We are actively considering increasing the share of premium memory chips and those for mobile products," an official at Samsung said. Hynix Semiconductor Inc., which increased the share of double-data rate chips to 80 percent of its memory chip production, will also concentrate on increasing the production of high-speed, high-end products. "Immediate cuts in production are impossible because of the characteristics of DRAM production procedures," a Hynix official said. Chipmakers around the world are improving production lines to pump out more chips at lower cost. The Hynix official was concerned. "If producers set up plants to make DRAMs from bigger silicon wafers, chip prices could plunge further," he said. by Pyo Jae-yong