D-Ram sector

This expected change in the supply and demand equation would prompt the Taiwan government to re-assess its plans to restructure the fragmented domestic industry, Mr Huang said. Taipei earlier announced the establishment of Taiwan Memory Corporation, a partially state-owned company aimed at ensuring Taiwan had proprietary D-Ram technology so it could remain competitive in the future.

The global D-Ram sector faced its biggest crisis in its 16 years of existence last year as industry over-expansion coincided with a drop in demand for computers as a result of the global economic downturn.

Taiwan restructures D-Ram chip industry - Mar-05Move to reshape Taiwan’s chip industry - Mar-05Tech blog - Jan-13But Mr Huang, who is also chairman of Powerchip, one of the biggest , said the industry would begin to recover by the second half of this year, and downstream producers of PCs and other electronic products will face “a shortage bigger than I have ever seen in the past 16 years … this will affect global PC shipments.”

Mr Huang on Wednesday played down the possibility of Elpida partnering with TMC, and said his companies would have nothing to do with the government entity.

“John Hsuan [TMC chairman] wants 40 per cent of Rexchip … over my dead body,” he said. “I might have considered it two months ago if they came with cash but now, no way.”

Last year's crisis, reflected in the price of D-Ram falling by more than half to below cost for most producers by the end of last year, led to a store of 1bn unsold D-Ram chips and nearly $10bn in total losses by the industry.

This prompted the biggest manufacturers, mainly in South Korea and Taiwan, to cut production aggressively. Others, such as Germany's Qimonda, fell into bankruptcy.

Nearly half of world production has been cut since the beginning of the year, Mr Huang said. This means that by June, the 1bn stockpiled chips will all be sold and by the end of the year there will be a global shortage of 2bn chips, equivalent to the D-Ram needed for 100m computers.

“It has been a difficult time but we can finally see spring coming,” said Mr Huang.

Part of the reason for the impending shortage, he said, was that most D-Ram companies are facing financial difficulties and would find it hard to revive production quickly. The other reason is that “wolf has been cried too many times [on a market recovery]. Everyone is too cautious,” he said. Powerchip and Rexchip, its joint venture with Japan's Elpida, would wait until prices rebounded before drastically increasing production and building up inventory, he said.

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License