| Spot market spikes upward on Taiwan unrest, higher demand and speculation By Kim Min-hee Korea's dynamic random memory makers are likely to reap handsome profits from the recent surge in computer memory chip prices, if only for the short term, industry watchers said. Debt-laden Hynix Semiconductors, which depends heavily on the spot market, is a prime benefactor of the price increase that is attributed to a set of different factors, including unstable market conditions in Taiwan, speculative trading and increased demand from emerging markets like China. An increase in chip demand is also expected as companies replace their computers with new models. Hynix's share price has doubled since the beginning of this year and hit 12,200 won on March 23, the highest level seen in the past 12 months. Recent target prices set for the semiconductor company released by major brokerages hover far above current prices. BNP Paribas, for instance, raised its target price yesterday to 19,000 won from an earlier 13,500 won. Strong DRAM prices, which are unusual for the season, would work favorably for Hynix, which is trying to post an operating profit for a third consecutive quarter and solidify its recovery process. Last week, spot prices of computer memory chips reached the highest levels seen in a year. 256-megabit double-data-rate chips with clock speeds of 333-megahertz and 400-megahertz, the most widely used chips for computers, were trading at $5.28 on Monday, up from $5.10 and $5.17 on Friday, respectively, according to Dramexchange. This is good for Hynix, the world's third-largest DRAM maker, as well as Taiwan's Powerchip, which depend heavily on the spot market. "The current prices for computer chips should help us post an operating profit in the first quarter," an official of Hynix said. DRAM chips account for about 80 percent of the company's sales, while memory chips for computers or DDR make up the bulk of its DRAM chips. The average production cost for DRAM chips is around $3.50. The official noted various factors were behind the rise in memory chip prices, including fears of disruption in supply as small chipmakers, including those in Taiwan, become fab contractors for developers. Industry watchers said Samsung Electronics Co., the world's largest DRAM maker, should also benefit from strong chip prices although less than Hynix because the company sells most of its products directly to personal computer makers on a contract basis. Contract prices between semiconductors and personal computer makers usually change monthly, although it can be reduced to 15 days in the case of dramatic price fluctuations. A Samsung official said that the company expects stable DRAM prices for much of this year. The official pinpointed new demand for PCs as one of the major factors behind strong chip prices. PC sales are expected to rise by 13.9 percent over last year worldwide, according to one source. Companies typically replace their computers every three years and this year happens to be that time. Woori Securities analyst Choi Seok-po forecast stable DRAM chip prices but said he did not expect an additional surge of substantial degree. "The current strong prices are not due to a real recovery of the market as fears arising from possible disruption in supply," Choi said. The analyst projected prices to come down somewhat in the second quarter with more supply coming from smaller semiconductor makers. He said the smaller companies were not operating at maximum capacity at the moment as they are upgrading their production facilities. He also said
that speculative dealers had shifted from RAND flash to DRAM recently, as the
prices of the former had fallen. From:
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