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Get Your RAM While You Still Can!!!

Discussion in 'Tech Talk' started by Big Al 24, Dec 17, 2008.

  1. Big Al 24

    Big Al 24

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    Apr 23, 2008
    Foreign Governments Line Up To Bail Out DRAM Industry

    Amid the U.S.'s own bailout dilemma, more countries line up to bail out DRAM producers

    The economic crisis has hit many industries hard from banking to automotive to the electronics business. International governments, including the U.S., have united to bail out the struggling banking and finance industry. Critics say that these bailout reward mismanagement and undermine the free market, while supporters say they are essential to prevent a depression.

    Meanwhile, American lawmakers struggle with bailout plans for the U.S. automakers, as public opinion opposes such a plan.

    However, another industry, often forgotten here in the U.S., has been hit even harder by the crisis, pushing it to the brink of collapse -- the DRAM business.

    DailyTech previously reported that the Taiwanese was considering bailing out its DRAM manufacturers, to save them from bankruptcy, through much needed cash loans. Now Germany and South Korea, two other major players in the business are closing in on plans to bail out their own DRAM firms.

    The DRAM industry was in trouble due to too much supply and not enough demand even before the worst of the economic downturn hit. However, when the crisis did hit, it sent the already hurting DRAM firms plummeting towards rock bottom. Many companies are on the verge of running out of cash and will soon go out of business without intervention. Ben Tseng, a vice president at Taiwanese DRAM maker ProMOS Technologies, states, "This industry is going through a critical stage."

    If the DRAM market collapses, there would be major ramifications for the notebook and desktop market worldwide, as every consumer computer uses DRAM. Mobile electronics, which also utilize DRAM, would likely suffer as well. All of these markets could see soaring prices if production dries up.

    DRAM makers blame the crisis partially on building too many factories. When Microsoft's Windows Vista was released, its high memory requirements were expected to boost DRAM sales. With loans cheap, many new factories were built -- too many in fact. Now DRAM makers are struggling to pay off these debts and remain operational.

    And the market may not have bottomed out quite yet. Jenny Lai, analyst at CLSA Asia Pacific Markets in Taipei says she expects global unit PC shipments to fall 20 to 25 percent as consumers feel the pinch of the economic downturn. She states, “The first quarter is likely to be the worst first quarter for the PC in its history."

    Taiwan's five biggest DRAM producers have posted $2.85B USD losses this year. Germany's Qimonda AG has lost $1.95B USD thus far this year. It says it will run out of cash and collapse in the first quarter without a bailout. Chipmakers have already tried to close old factories and cut employees to cut costs.

    The bottom line problem is simple math -- the most prevalent DRAM chips cost around $1.30 to $1.50/G-bit (DDR2, 667) to produce while they sell for $0.59.

    South Korea's Hynix, already bailed out in a controversial 2001-2002 decision, is also is in need of cash. The situation for Taiwan's largest DRAM maker, Powerchip Semiconductor is even worse, as it expects to soon go out of business without loans. Taiwan's ProMOS faces similar problems. It insists it will pay back what it borrows, stating, "We are asking for access to loans. This is not a handout. The government will get paid back."

    Ultimately the bitter pill that critics and proponents of these and other industry bailouts alike must mull over is this --- if the DRAM, automotive and other industries are not bailed out, their collapse will drag down other related industries and place more stress on the already-bailed-out creditors. However, if they are bailed out, they are just accumulating greater debts, debts which could drag the global economy deeper into recession or worse, should sales and the economy not turn around.

    Last edited: Dec 17, 2008