By Baker Li - Analysis
TOKYO (Reuters) - All personal computer memory chip makers are sharing the pain of the sector's worst downturn in history, but only those companies which can cut costs, while bringing out more profitable chips used in new games consoles and mobile phones, will benefit from a nascent recovery.
After a slump that lasted well over a year, chip prices are beginning to stabilize, while demand for a new crop of personal computers and handheld multimedia devices that require specialized chips signals the market is on the brink of recovery.
Market researcher iSuppli Corp is optimistic, saying it is likely to upgrade its rating on the computer dynamic random access memory (DRAM) market to positive. It has already raised its recommendation to neutral from negative.
Standard DRAM chips -- still the mainstay of these companies' revenues -- are commoditized items, making it tough for rivals to make their products stand out.
But companies, such as Samsung (005930.KS: Quote, Profile, Research, Stock Buzz) and Qimonda (QI.N: Quote, Profile, Research, Stock Buzz), can also get an edge in the market for specialized, more powerful chips that go into smartphones, game consoles -- such as Microsoft's (MSFT.O: Quote, Profile, Research, Stock Buzz) Xbox and Nintendo's (7974.OS: Quote, Profile, Research, Stock Buzz) Wii -- and other mobile devices used for e-mail and multimedia functions.
"One must understand that we are very clearly moving away from commodity business and putting all our energy in the non commodity business," Qimonda Chief Executive Kin Wah Loh told the Reuters Global Technology, Media and Telecoms Summit.
Analysts expect sales of DRAM chips to fall by just over 10 percent this year, but after that, global sales are set to grow by a fifth, reaching $33.3 billion in 2009. specialized DRAMs should contribute about one-third of that total, say UBS.
CUTTING COSTS Continued...
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