Korea's memory chip lead threatened

DRam market leader Samsung will have increasing difficulty competing with cost-cutting rivals in Taiwan and China, the head of a leading research firm told executives and reporters at the Seoul Digital Forum yesterday.

Other South Korean memory makers are also at risk, according to Derek Lidow, chief executive at iSuppli.

Taiwanese and Chinese suppliers could be exceeding South Korea's output of DRam chips as early as 2010, when total revenue exceeds US$45bn.

"South Korean companies are adding DRam manufacturing capacity, but this is contributing significantly to the collapse in pricing for memory chips this year," said Lidow.

"These price declines will cause South Korean manufacturers to reduce DRam output growth next year, while Taiwanese and Chinese suppliers will increase their output and may surpass the South Korean manufacturers in capacity by 2010. "

South Korean manufacturers were responsible for 45 per cent of all global DRam sales last year, while Taiwan and China trailed with only 17 per cent.

However, oversupply and plunging prices mean that Korean manufacturers will not expand capacity greatly, while their rivals are still growing at a breakneck pace.

Korea's DRam industry is dominated by Samsung and Hynix, two giant, and relatively mature, firms. However, Taiwan's and China's memory manufacturing environments are characterised by numerous smaller, and newer, firms.

"South Korea's manufacturing and investment base is highly concentrated, making it very challenging for the nation to maintain long-term leadership in capital-intensive areas in spite of its superior technology and operational experience," said Lidow.