Samsung Warns Of Oversupply In Memory Chips
Samsung Electronics warned recently of an oversupply in the computer memory chip market from next quarter as PC sales are forecasted to weaken.
The South Korean firm’s comment raises concerns that the boom in the DRAM sector may be coming to 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," John Chiu, a fund manager at Taiwan’s Fuh Hwa Securities Investment Trust, told Reuters.
"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."
Samsung’s warning adds to a series of comments from others that prices would fall in the second half because of an 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 is the beginning of the holiday shopping season.
Samsung ranks above its key DRAM rivals, Elpida Memory, Nanya Technology and Hynix, but below Micron Technology, according to Thompson Reuters’ StarMine Analysts Revision Model.
Samsung’s chief executive Choi Gee-sung told reporters in Berlin this weekend that it is considering raising its spending to $25.5 billion next year.
A company spokesman confirmed the comments made by the CEO on Tuesday.
Samsung’s investment plan is a prelude to a potential DRAM oversupply in the quarters ahead amid an uncertain economic outlook.
The price of DRAMs 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 decide to buy smaller tablet computers.Â
The new device is gaining popularity after Apple introduced iPad and vendors like Samsung, Nokia, LG Electronics and Dell started releasing products to tap into the market.
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