Hyundai Electronics Co, one of the wounded giants of the Korean economy, is halting production of dynamic random access memory DRAM chips at its facilities outside of Seoul for a week. In a statement that suggests Korea’s second largest chipmaker is running out of warehouse space, the company said it hopes the stoppage will ease the current memory chip market glut and prop up chip prices. The move comes less than a month after Hyundai started production in Oregon of 64-megabyte synchronous dynamic random access memory SDRAM chips. Hyundai’s gesture came on a day when a research organization forecast that it expects the DRAM market to drop another 20% in 1998 to $15.7bn following declines of 38% in 1996 and 21% in 1997. In-Stat predicts that recovery will be slow, with 1999 DRAM revenue barely reaching the 1997 level of $20bn. In its brief 27-year history, the DRAM market has cycled through three earlier downturns and this down cycle promises to be the longest, although not the last, said Steve Cullen, senior DRAM analyst for In-Stat. The basic problems causing the set-back in the DRAM industry include excess capacity, slowing demand growth, and the fact that Korea, who manufactures more than a third of the DRAM supply, experienced the recent weakness in the Korean won, said Cullen. He said the enormous capacity brought about by both established and new suppliers responding to the tight market from 1993 to 1995 still remains. Measured in bits, capacity is continually growing as suppliers continue to shrink 16Mbit designs to accommodate more die on each wafer, and as some capacity is upgraded to 64Mbit capability. On a more cheery note, Cullen expects that as the transition from 16Mbit to 64Mbit continues into 1999, overall revenue will grow and 1999 may reach the 1997 level of $20bn. However, In-Stat forecasts that it will be 2001 before the $40bn level seen in 1995 is once again attained. In another gloomy survey, the US Semiconductor Industry Association forecast that global sales will decrease 1.8% to $134.6bn. They predict that sales will pick up steadily during the second half of 1998 and are projected to exceed the industry’s historical growth rates of 17% or more in 1999, 2000 and 2001. The financial turbulence in Asia and other market changes has crimped the expected expansion of global chip markets in early 1998, said SIA President George Scalise. Thanks to the unprecedented growth of internet usage, we now expect the industry’s expansion to occur in 1999 as semiconductor growth rates return to their historical averages of 17% or more. The midyear forecast was prepared by analysts for the World Semiconductor Trade Statistics WSTS, a global organization representing 73 semiconductor companies. According to the WSTS, global sales will rise 17.2% in 1999 to $157.7bn, 18.5% in 2000 to $187.0bn, and 18.9% in 2001 to $222.3bn. Scalise said that with Internet use doubling every 100 days, and Internet commerce about to explode we can already see the beginnings of the next growth cycle for semiconductors and consumer electronics. Scalise forecast that new growth cycle will be driven by more versatile microprocessors, digital signal processors, systems-on-a-chip, communications and networking devices, and new consumer products such as digital cameras and digital video disks.
