Analyst: China will pass Korea in chipmaking

Korean memory chipmakers will likely lose ground in global markets to Taiwanese rivals as memory prices continue to fall, a leading market analyst said yesterday.

At the Seoul Digital Forum, iSuppli CEO Derek Lidow said Korean firms’ hold on the dynamic random access memory, or DRAM, chip market will falter. Korea’s Samsung Electronics Co. and Hynix Semiconductor are the top two memory chipmakers in the world, holding about 45 percent of the market last year by revenue. iSuppli is one of the world’s largest IT market research firms.

Lidow said that the situation for DRAM is severe because price levels today are below production costs for almost all suppliers. “The market will bottom out within the next seven weeks. The overall industry will see double digit profit losses when they report [performance] in July,” he said.

In particular, Lidow said that China and Taiwan will pass Korea as the region with the largest share of DRAM production by 2010.

“There is a high concentration of production in Korea and a few key suppliers, while the Taiwan/China region has many suppliers of DRAM and is able to spread the risk of investment over many more players,” he pointed out. “This makes it hard for Korean suppliers to fight off so many competitors at once.”

He said that the situation is similar to that of liquid crystal displays, where Korea lost dominance to Taiwan and China three years ago.

“Creation of more investment capital through market liberalization or through tax incentives will help Korean industry diversify and make use of immense talents in population,” Lidow suggested. “With such a narrow base in the IT industry here, I believe that innovations will always be at risk of being taken over and copied by other regions who have the ability to attract that risk [venture] capital.”

By Wohn Dong-hee for JoongAng Daily

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