Neowin.net

South Korea's Hynix Semiconductor Inc announced a 30 percent hike in contract chip prices on Wednesday, sparking a surge in memory chipmakers' shares by signaling a possible rebound for the hard-hit sector.

Falling chip prices last year nearly toppled Hynix, the world's third largest memory chipmaker, which is in alliance talks with larger U.S. rival Micron Technology aimed at keeping it alive until a solid price recovery takes hold.

Hynix said its price hike for long-term contract customers went into effect on Tuesday, with a 30 percent average rise based on 128 megabit DRAM (dynamic random access memory) equivalent chips.

"Sales of personal computers are rising with the spread of Windows XP," said a company spokeswoman. "A PC sales boom in China is also helping.''

Samsung Electronics, the world's largest memory maker, said it too was considering raising contract chip prices.

News source: Reuters

"Contract prices need to be readjusted again to narrow gaps with spot prices," a Samsung executive told Reuters. He declined to specify how large an increase Samsung might make.

Samsung and Hynix both raised contract prices for DRAM chips, used for memory in personal computers, twice late last year.

Their top clients include Intel, IBM and Dell Computer.

Shares surge
Their shares soared on Wednesday's news of further rises.

Hynix finished up 15 percent, the shares' daily limit, at 2,780 won. Samsung closed up 10.4 percent at 308,000 won, leading the benchmark stock market index up 4.5 percent.

Taiwan's memory chipmakers also jumped on the news, with Powerchip Semiconductor surging the daily seven percent upward limit and rival Mosel Vitelic adding 4.7 percent.

Spot prices for DRAM have mounted a recovery in recent weeks after a year-long slide that erased 90 percent of their value and made the cost of production more expensive than selling prices.

The slump was blamed on excessive supply and an abrupt slowdown in global demand for PCs.

Analysts said prices were still short of production costs and that a full recovery was not expected until the third quarter at the earliest.

"Chipmakers are still selling products below costs," said Jon Woo-jong, an analyst at SK Securities. "They need to sell them at a minimum of $3.2 on average to cover costs."

Spot prices for standard 128 MB 16x8 DRAM chips were quoted at $2.68 on average on Wednesday by DRAMexchange (www.dramexchange.com), an industry Web site. That was up more than four percent from Monday.

Narrowing the field
A global move to consolidate the sector, as seen in the Micron-Hynix talks, could help facilitate a recovery, analysts said. Hynix expects an alliance with Micron to take shape this month, including the possible sale of DRAM production facilities to the U.S. company.

"We'll decide whether to sign an agreement in January," Hynix President Park Chong-sup said in an e-mail to employees released on Wednesday.

Hynix has said it might sell operations making the most common types of DRAM chips to Micron. Micron has already moved to grab a bigger chunk of the sector, agreeing in December to buy a U.S. chip plant from Japan's Toshiba.

The decision came after a planned DRAM tie-up between Infineon Technologies and Toshiba fell through.

Infineon Chief Executive Ulrich Schumacher said afterwards the German firm had opened talks with Taiwanese makers Nanya Technologies, Mosel Vitelic and Winbond Electronics regarding possible tie-ups.