The continuing drop in international DRAM prices makes it increasingly unlikely that Korea will hit its economic target of a $25bn trade surplus this year, government planners were quoted as saying in the local media. The average spot-market price of 64Mb DRAM chips at the end of last month was less than $5, compared to $9.70 last December and a market peak of $18 at the beginning of 1998, which dropped to $7.80 last June before picking up again when Korean and Japanese makers cut production.
Although the large Korean makers are starting to shift production capacity to next generation 128Mb and even 256Mb DRAMs, the majority of chips being produced are still the current standard 64Mb units, and will be for some time to come.
The sharp price drop is partially due to an increase in production and supply but also to competitive pricing by Taiwanese and US makers, the Koreans say.
For now, we are not too concerned since most of our sales are done under long-term contracts. However, in the long run, spot market prices will affect long-term contracts, said one Samsung Electronics official. He said with the global restructuring of the global semiconductor industry it remains to be seen how long Taiwanese and American producers can sustain their viability.
We cannot disclose what our break-even point is but it is a well-known fact that it is much lower than most of our competitors. We have yields that are some of the highest in the market, he said. But no matter how good their yields are, export growth in value terms is slowing and the impact on the growth figures is starting to be seen.
