Rising demand for NAND-type flash chips used in portable electronic devices is expected to prompt makers to switch more production from dynamic random access memory (DRAM) to NAND, easing DRAM supply, said Chu Woo-Sik, executive vice president in charge of investor relations at Samsung.

To reduce cost, many memory chipmakers will have to cease older production lines using 8in wafers. Converting to more profitable lines that produce more chips from bigger wafers takes time and money. "In the next few months, they will have to make the critical decision to retire those facilities," Chu said.

The DRAM sector, which includes South Korea’s Hynix Semiconductor Inc. and Germany's Qimonda AG, has been plagued with oversupply since the start of 2007. Buoyed by a strong growth period, many chipmakers kept producing out DRAM chips despite the lack of great demand, causing steep price drops. Some DRAM chips are nursing price drops of more than 80 percent since the beginning of the 2007.

iSuppli said market conditions should slowly improve during the next few quarters, with DRAM picking up more quickly than NAND. The market research firm said that the DRAM sector generated $7.96 billion in Q3 2007, an 8 percent rise from the previous quarter.

Samsung's forecast is more bullish than that of iSuppli, which has cut its rating on suppliers of DRAM and flash memory chips to "negative" from "neutral", citing a supply glut and a fall in prices. In October 2007, Samsung posted a flat Q3 net profit as sluggish computer memory chip prices offset strong flat screens, and had warned that the whole memory sector could see losses in Q4 2007.

By: DocMemory
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