DRAM makers face tougher challenges: iSuppli

SEOUL (Reuters) - DRAM suppliers face tougher challenges in servicing debts and financing capital expenditure as banks become more cash-strapped under the global credit crunch, research firm iSuppli said.

"Even with the expected intervention by the U.S. government, this crisis means the cost of capital will rise because cash-strapped banks will be reluctant to take on big, risky ventures," chief analyst Nam Kim said in an iSuppli report obtained on Saturday.

"This is a particular challenge for the capital-intensive DRAM manufacturing business."

In late September, iSuppli cut its near-term market rating on dynamic random access memory (DRAM) chips used mainly in personal computers, to "negative" from "neutral." It cited severe oversupply, weak demand, unexpectedly sharp price declines and the approach of seasonally slow period of the market.

With the exception of sector leader Samsung Electronics Co Ltd (005930.KS) of South Korea, all major makers of dynamic random access memory (DRAM) chips, used mainly in personal computers, are suffering losses.

"Amid weak market conditions and the credit crunch, cash management has become the most critical issue facing DRAM suppliers," Kim said.

"This will have the impact of reduced capital expenditures among DRAM suppliers in early 2009," he said.

Japan's Elpida Memory Inc 6665.T and Taiwan's Powerchip Semiconductor Corp (5346.TWO) had said last month they planned to cut DRAM output to fight oversupply and falling prices.

(Reporting by Angela Moon; Editing by Lincoln Feast)