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Taiwan's Nanya warns DRAM supercycle is ending

U.S.-China tech cold war makes chip industry cautious on investment, chief says

Nanya Technology is the world's fourth-largest maker of DRAM chips.   © Reuters

TAIPEI----Taiwan's Nanya Technology on Tuesday warned that the price hike of dynamic random access memory chips -- used in the growing number of connected devices -- could peak in the current quarter, ending a nearly two year memory chip supercycle.

"We are seeing prices of some types of DRAM chips such as those for PCs to go down... the demand for PCs and notebooks are weakening but the demand for data center server still looks healthy," President Lee Pei-ing, president told reporters.

"Overall, for the current quarter, DRAM price could either stay at the same level or correct slightly... but I think if there is any correction, it would be limited to 1-2 percentage points."

Earlier this year, Lee was a bit more optimistic about the DRAM price, saying there was still room for the price to rise until the July-September quarter.

Nanya Tech is the world's No. 4 DRAM chip provider, trailing South Korean rivals Samsung Electronics and SK Hynix and U.S.-based Micron Technology. DRAM is a crucial component in a wide range of electronics, including PCs, smartphones, connected cars, various connected devices, and data centers.

For the April-June period, Nanya Tech's revenue jumped 94.8% on the year to 24.59 billion New Taiwan dollars ($806.2 million). Gross margin reached a company record of 55%, up from 43.9% a year earlier, and higher than the 51.8% in the January-March quarter. The company's net profit climbed 74.2% to NT$11.3 billion.

All memory chipmakers worldwide have enjoyed a robust supercycle since the end of 2016 thanks to rising DRAM prices and a tight market supply.

Lee Pei-ing, president of Taiwanese chipmaker Nanya Technology, says there is still room for DRAM prices to rise in the July-September quarter. (Photo by Cheng Ting-Fang)

However, China's antitrust regulator is looking into whether top three global memory chipmakers manipulated prices, Samsung, SK Hynix and Micron all confirmed in June. Meanwhile, the escalating technology cold war and trade tensions between Washington and Beijing is creating uncertainties for the long term, Lee said.

"Caution is needed. We are closely monitoring the current trade tensions as well as China's probe on price manipulation," said Lee. "As DRAM chips go into almost every electronic device, we are concerned whether the trade conflicts could eventually hit global electronics demand and has a negative impact on economic condition."

Lee added that all the big memory chipmakers are "paying close attention" to trade disputes, while such uncertainties make his peers more careful when it comes to big capacity expansions that could cause major oversupply in the market.

Nanya Tech does not supply chips to Apple but it does supply HP, Dell, Kingston, Huawei, Lenovo, Xiaomi, and many other global consumer electronics makers.

Sean Yang, an analyst at Shanghai-based research company CINNO, echoed Lee's comments and said there is no upside for DRAM price to go up currently.

"We don't see growth catalysts for the DRAM price to continue to be up for now," Yang said.

"And for 2019, the price will go down for sure. While new artificial intelligence features and electric cars are all boosting DRAM demand, these new applications could not yet offset headwinds in the slowing smartphone and PC market."

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