By Sinead Carew and Mayumi Negishi - Analysis
NEW YORK/TOKYO (Reuters) - Investors looking to bet on the global chip industry may want to put their money in fast-growing analog chips, with the downtrodden computer memory market poised for only a modest recovery this year.
Prices for flash memory chips used in portable devices appear to be stabilizing, but executives at the Reuters Global Technology, Media and Telecoms Summit said they were less certain of the timing of a recovery in that sector.
"I'm kind of worried about flash," said Hiroshi Suzuki, chief executive of Japan's Hoya Corp (7741.T: Quote, Profile, Research, Stock Buzz), which makes photomasks used to copy electronic circuit patterns onto semiconductors.
"For DRAM, I think we probably saw the bottom already. It looks like the flash supply capacity equation is actually worse than the DRAM side," Suzuki said at the Tokyo summit.
Analysts expect global sales of dynamic random access memory, or DRAM, mainly used in computers and increasingly in cutting-edge mobile phones, to fall by 10 percent this year before growing by about 20 percent in 2009.
Top DRAM suppliers Samsung Electronics Co Ltd (005930.KS: Quote, Profile, Research, Stock Buzz) and Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research, Stock Buzz) have seen prices rebound since April, leading industry executives to expect a return to a balance between supply and demand sometime in the second half of the year.
"The DRAM industry has been in the last couple of quarters going through a dramatic price decline. It's simply (that) there was too much supply in the market," said Kin Wah Loh, the chief executive of Qimonda QI.N, the world's fourth-largest maker of computer memory chips.
"We are seeing now the effect of this reduction in supply and that is a good sign," Kin said in Tokyo. "It's really a matter of time, technology and supply. Going forward in the second half the supply will be more balanced."
FLAT FLASH PRICES
Japan's Toshiba, whose semiconductor business posted an 80 percent plunge in operating profit in January-March, said it expected the price of NAND flash chips, used in portable gadgets like Apple Inc's (AAPL.O: Quote, Profile, Research, Stock Buzz) iPod, to be flat this quarter.
"Prices will either be flat or go up a bit in July-September," said Corporate Senior Vice President Shozo Saito at Toshiba, the world's No. 2 NAND maker.
Even though prices are stabilizing, to be safe, the company was still prepared for a drop of up to 50 percent this business year, Saito said.
In this environment, the world's largest maker of chip manufacturing equipment, Applied Materials Inc (AMAT.O: Quote, Profile, Research, Stock Buzz), predicted a cut of up to 35 percent in capital spending for the industry in 2008.
CEO Mike Splinter said he was also looking for a recovery, but that it would drag into 2009 due to a flash and DRAM capacity surplus.
"As demand grows in the second half of the year, we will see that starting to come back modestly, but I am not calling for a very fast recovery here at all," Splinter told the summit in New York. Continued...
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