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Taiwan pumps up memory chips

The extra volume could hold prices down and delay the memory market's recovery.

A number of Taiwan-based memory manufacturers will ramp up production and sales of 64-megabit memory chips in 1998, a move that could turn the island nation into the No. 3 memory manufacturer worldwide as well as push a memory market recovery back to 1999.

The Taiwanese effort could also result in denser, more efficient memory in desktops by next year, since 64-megabit chips essentially pack four times more data than 16-megabit chips into the same chip real estate. The memory chip market is currently dominated by modules which integrate 16-megabit chips. Typically, modules come in capacities of 8 megabytes (MB) or 16MB.

Promos Technologies, TI-Acer, Powerchip Semiconductor, Vanguard International, Nan Ya Technology, and Winbond Electronic are all currently accelerating their 64-megabit dynamic RAM (DRAM) memory chip efforts, according to reports in the Commercial Times, a Taiwan-based newspaper.

Promos and TI-Acer are currently manufacturing 64-megabit DRAM, while the other manufacturers will launch products in the fourth quarter, the newspaper said. Shipments from most manufacturers will occur in the first half of next year.

Although the results of this effort remain to be seen, analysts agree that these manufacturers could prevent prices and profits from returning to normal in this hard-hit segment of the industry. Overcapacity in memory manufacturing has caused prices to drop dramatically over the past two years.

The prices for 16-megabit DRAM chips have slid from $12 per chip in volume at the end of 1996 to between $5,50 to $7 now, just above manufacturing costs of $5.50, according to various estimates. During the same period, 64-megabit memory has during the same period sunk from $250 to between $30 and $36, and continues to drop.

"We see the market getting more into balance in late 1998. More capacity would push the balance further out," said George Iwanyc, memory analyst at Dataquest, who confirmed the current price figures above.

Price wars, however, benefit computer buyers by lowering system costs as well as opening the door for computer vendors to include more memory in standard configurations.

Dropping prices on 64-megabit DRAM means that consumers will likely see this type of memory in desktops quicker than anticipated, said Carl Johnson, president of Infrastructure. Currently, 64-megabit DRAM is mostly used in workstations while 16-megabit DRAMs constitutes the main memory chip for PCs.

"We're seeing prices come down to a point that will make it attractive to put in PCs by the first quarter of next year," he said. "The ramp is going to be quick."

Whether the Taiwanese manufacturers can accomplish this task during the next year remains a subject for debate. Most Taiwanese capacity is still geared toward 16-megabit memory, said Iwanyc. As a result, volumes of 64-megabit DRAM from Taiwan may not be huge. In that sense, the announcement can be viewed as more of a statement about their capabilities, not necessarily an acceleration in manufacturing plans.

Johnson, on the other hand, said that Taiwan manufacturers have been rapidly trying to adopt the latest technology from Korea and Japan and could move fairly rapidly to product production.