Flash Chip Price Falls Seen ContinuingMoon Ihlwan
A Micron Technology executive’s forecast that prices of NAND flash memory chips could fall between 30% and 40% in the current quarter sparked plunges in share prices of Asian memory chip makers today. But if the prediction by Mike Sadler, Micron’s head of sales, proves true, that actually is a good piece of news the industry should welcome. Prices of NAND chips, which store data in portable music players, digital cameras and other mobile gizmos, have already fallen by more than 30% so far this year and that means further falls will probably be limited.
Industry officials, however, are not sure if prices will stabilize over the next six weeks. “At the end of last month, I projected a 55% NAND price fall in the first six months of this year and a further 10% fall in the second half,” says Michael Min, semiconductor analyst at brokerage Korea Investment & Securities in Seoul. “I don’t really see any major turnaround until May when phone manufacturers are expected to create significant NAND demand to make music phones to compete with Apple’s iPhone.”
It is not surprising to see weakening memory chip prices in the first six months virtually every year, although price falls in the past six weeks have been much deeper than the cyclical industry had expected. Min thinks the weaker-than-expected prices won’t spell disaster for leading chipmakers either. He projects an operating profit of $5.7 billion for Samsung Electronics’ chip business for all of this year, up from $5.2 billion in 2006 when NAND prices fell some 65%. Samsung, which is the world’s largest maker of NAND and DRAM chips (largely used for computer memory), is expected to increase its market share by two or three percentage points in the industry in 2007 although its profit margin is expected to fall to 33% this year from 38% last year from its memory business, according to Min.