Samsung warns DRAM oversupply on weak PC sales

TAIPEI/SEOUL (Reuters) - Samsung Electronics, the world’s top memory chipmaker, warned of an oversupply in the computer memory chip market from next quarter as a sputtering global economy may further weaken PC sales.

The downbeat comment from the South Korean firm raises concerns the boom in the DRAM sector may be nearing an end.

“We all know the PC market is not in a good shape now and if demand can’t pick up, inventories will go higher,” said John Chiu, a fund manager at Taiwan’s Fuh Hwa Securities Investment Trust.

“But we might pin some hopes on the upcoming long holiday in China in October and the Chinese new year holiday early next year, if demand picks up then, some inventories might can be absorbed.”

The caution by Samsung adds to a series of previous warnings by Samsung and its local rival Hynix Semiconductor Inc, among others, that prices would fall in the second half due to the uncertain economic outlook.

“If the PC market continues to slow, we may see a kind of oversupply in Q4 or Q1,” Kwon Oh-hyun, head of Samsung’s chip business, said at a media conference at its annual mobile solutions forum in Taipei.

“Because of mobile phones and servers, the DRAM (dynamic random access memory) market will be stable, while PC is the weakest sector and it depends on demand from the U.S. Thanksgiving” in late November, which typically marks the beginning of the heavy pre-Christmas sales season.

Based on Thomson Reuters’ StarMine Analysts Revision Model, a measure of change in analyst sentiment, Samsung ranks above its key DRAM rivals, Elpida Memory, Nanya Technology and Hynix, but below Micron Technology.


Samsung, which is planning a record 26 trillion won ($22 billion) investment this year for capacity expansion and research and development, is considering raising spending to 30 trillion won next year, its chief executive Choi Gee-sung told reporters in Berlin at the weekend.

On Tuesday, a company spokesman confirmed the comments made by the CEO.

The investment plan by Samsung, already the most aggressive investor with a record 11 trillion spending on chips alone this year, is a prelude to a potential DRAM oversupply in the quarters ahead amid an uncertain economic outlook.

Prices of DRAMs, widely used in computers, have turned weaker since July after an unusually strong first half, as PC demand growth lost momentum and as the European debt crisis threatens to further weaken sales of computers and other consumer goods.

PC sales are also taking a hit as consumers delay purchases and opt for smaller tablet computers, which use fewer DRAM components than desktops and notebooks.

The new device is gaining popularity after Apple introduced iPad and vendors such as Samsung, Nokia, LG Electronics and Dell are rushing to get a piece of the emerging market.

Samsung shares have seen little change over the past three months, while Hynix dropped 17 percent, lagging a 7 percent gain in the KOSPI.


($1=1171.1 Won)

Editing by Jonathan Standing and Anshuman Daga