Chip mkt growth to dip 50% next year: Samsung

Rhee So-eui and Yoo Choonsik

SEOUL: Growth in global semiconductor sales will probably halve next year and memory chip sales growth could stall as a supply glut saps prices, the world's leading memory chip maker, Samsung Electronics, said.

Global semiconductor sales growth would come in slightly below 10 percent next year following estimated growth of 20 percent this year, Hwang Chang-gyu, president of Samsung Electronics Co. Ltd.'s semiconductor business, told a news conference.

The forecast came as major players adopt new technologies to boost production efficiency, trying to catch up with Samsung and its cutting-edge factories.

"The pace of growth will definitely slow for memory chips, mainly due to increased supply," said Hwang.

"The global semiconductor market is expected to grow 20 percent this year to $220 billion, but it will be difficult to achieve 10-percent growth next year."

Kim Il-ung, who handles marketing for Samsung's memory chip division, later told reporters that growth in the memory chip market alone would slow to about 5 percent in 2005.

Sales are estimated to grow by 60 percent this year to $43 billion, Kim said.

"Under next year's outlook, Samsung is hinting at possible lower growth down the road," said Jay Kim, an analyst at Hyundai Securities.

"Competitors' past investments could translate into downward pressures on chip prices," Kim said, adding that prior investments in 300 mm (12-inch) wafers and more developed chip circuitry facilities would boost overall production next year.

Shares in the world's largest memory chip maker closed 0.11 percent lower at 469,000 won ($410), wiping out early gains chalked up before the sluggish outlook was announced. The wider market ended over 1 percent higher.

Q4 SALES

Hynix Semiconductor Inc., the world's fourth-largest memory chip maker in 2003, said last week it would more than double its investment to $1.6 billion this year as part of efforts to narrow the gap with market leader Samsung.

Samsung, the most aggressive investor in the industry, plans to spend 8.94 trillion won ($7.8 billion) this year.

"The chip industry will likely hit the bottom sometime in the second quarter of next year," said Michael Min, a Dongwon Securities analyst.

Hwang said 2004 fourth-quarter semiconductor sales would be similar to, or slightly higher than, sales in the third quarter.

"Demand for DRAM (dynamic random access memory) is seen strong and flash memory prices are expected to stabilize," he said.

Prices of NAND flash memory, used in mobile phones and hand-held electronics, were seen falling 40 percent in the third quarter from the second quarter, data from Samsung showed.

Still, it expected to post third-quarter memory chip sales above the $3.2 billion seen in the April-June quarter, Hwang said. He did not give specific figures.

"Our market share in the global flash market will rise to over 30 percent this year," Hwang said.

Explosive demand prompted Samsung and other global players to switch a significant portion of their capacity to flash chips, bringing about technology improvements that slashed costs.

Samsung also revealed the industry's first 8-Gigabite NAND flash memory with chip circuitry of 60 nanometres (0.06 micron), or billionths of a meter.

The newest process technology, two thousandths the width of a human hair, reduces chip sizes and boosts production efficiency as more chips can be manufactured per silicon wafer.

Hwang declined to comment when asked about German chipmaker Infineon's case over price-fixing charges.

Infineon Technologies AG last week agreed to plead guilty to charges of price-fixing and pay a $160-million fine as part of a U.S. investigation.

Samsung, as well as other major chip firms, such as Micron Technology Inc. and Hynix, have acknowledged involvement in the probe.

(US$1-1145.7 won)