30 November 2010—South Korea dominates two important global technology industries: memory chips and flat-panel displays. The deadly artillery battle on South Korea’s Yeonpyeong Island last week has put the peninsula in its most tense state in decades. But it remains to be seen if that tension will have a negative effect on its technology sector, or if competing companies in other countries can turn the uncertainty to their advantage.
Together, South Korean companies Samsung Electronics and Hynix Semiconductor have more than a 60 percent share of the dynamic RAM market, according to the market research firm iSuppli, in El Segundo, Calif. Any disruption in their ability to produce and deliver DRAM would have a huge impact on the electronics industry, says Mike Howard, a senior analyst at iSuppli. DRAM is critical to making smartphones, televisions, computers, and tablets.
"If the current tensions between North and South Korea present supply challenges for Korean DRAM makers, then Taiwan would certainly benefit from the tightness in supply, as would Elpida Memory in Japan and Micron Technology in the United States," Howard says. Taiwan is home to many of the top 10 DRAM makers, but none of the top four.
In Taipei, market analysts say the situation on the Korean Peninsula is worth paying close attention to. According to Ivan Lin, the spokesperson for Taipei-based research firm TrendForce, its analysts have made predictions for certain industries based on the possibility that tensions do not ease within a couple of months or if "a new wave of attack was launched and important makers’ production lines were damaged." However, TrendForce is keeping mum on the specifics of those predictions for now. Lin says that even if the tensions continue, the company does not expect purchasers to switch orders until the first quarter of next year because of chipmakers’ existing inventory and purchasers’ wait-and-see attitude.
In Taiwan, investors’ weak response tells the story more clearly. The stock prices of local DRAM makers rose for only one day, on 24 November, and then fell on subsequent days. Market analysts say that oversupply led to the drop in price.
Taking the recent Korean conflict into account, DRAMeXchange, a research division of TrendForce, released a 2011 DRAM industry outlook on 25 November. The outlook predicts that DRAM supply-bit growth will increase 50 percent next year due to manufacturers migrating to newer technology capable of making chip features between 30 and 50 nanometers across. The outlook also says that Samsung expects more than half of its production to be at 35 nm in the second half of 2011, while other vendors such as Hynix, Micron, and Elpida will begin mass production at 30-plus nm in the second quarter of next year. Taiwanese vendors aim to migrate to 40-plus nm in 2011. DRAM price, meanwhile, will next bottom out during the first quarter or, at worst, the end of the second quarter.
Besides their domination of DRAM, South Korean firms have half of the global market of NAND flash memory. DRAMeXchange, which also tracks flash, remains optimistic for the 2011 flash market because of increasing demands from tablet PCs and smartphones in North America and Europe. It expects that the average selling price will decline 35 percent year-on-year in 2011 but that sales will grow about 16 percent year-on-year to reach US $21.5 billion.
As for the display industry, analysts in Taiwan say that if the situation worsens, some purchasers may withdraw their orders from panel makers Samsung and LG Display. Both have key production bases in South Korea. The likely beneficiaries would be Taiwanese thin-film-transistor (TFT) LCD panel manufacturers, including AU Optronics and Chimei Innolux. However, South Korean panel makers are still growing at a rapid rate. In a report issued the day after the artillery battle, research firm Displaybank indicated that in October, South Korea gained a record high share of the global TFT-LCD panel market at 53.9 percent.
About the Author
Yu-Tzu Chiu is a Taipei-based reporter. In the August 2010 issue of IEEE Spectrum, she reported on Taiwan’s ambitions in cloud computing.