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Koreans to slow memory making

South Korean memory makers will scale back production of 64-megabit chips in an effort to achieve price stability.

South Korean memory manufacturers will further scale back production of 64-megabit chips in an effort to achieve price stability on a product that continues to drop in value.

Samsung, Hyundai, LG Semicon, and other Korean memory makers have again decided to limit production of the memory chips, which are mostly used in servers and workstations, in an effort to dry up a market surplus that has existed since last year, according to the online edition of Nikkei Business Publications, a Japanese news service.

The manufacturers recently met with representatives of the South Korean government to develop ways to limit production.

64-megabit chips can be found in spot markets for $10 to $15 dollars and even less, report memory sources, while contract prices for the chips are only slightly higher. Circuit board vendors and computer makers shop in these forums.

These wholesale prices are directly translating to lower costs for the parts consumers buy. Generic 64MB memory modules, which contain eight 64-megabit chips and are sold over the counter as memory upgrades, can be found for $65 at a number of computer dealers. Brand-name modules, meanwhile, sell for around $100.

64-megabit chips sold for $250 in January 1996 and $45 a year ago. 64MB modules sold for far more.

Excess chip supply, expanded plant capacity, improved manufacturing capabilities, and the Asian business crisis have all contributed to the slide in memory prices. The drop in prices has lead to losses for both Korean and Japanese manufacturers.

Although nearly all of the major vendors have cut back production of both 16-megabit and 64-megabit chips in the past two years in an effort to get rid of some of the excess product, the restraint hasn't done the trick. The price slide has continued and manufactured supply has continued to outpace demand.

LG Semicon president Koo Boon-Joon, in fact, expressed doubt that this latest effort to restrain manufacturing will work. "LG will decide its course of action after observing the policies of other companies," he told Nikkei.