HSINCHU, Taiwan --- Kingston Technology Inc. is planning to raise its memory chip purchases from Taiwan. The Fountain Valley, Calif. module maker said that it would buy about one-third of its global procurement from the island in 2002. Last year, Taiwan chipmakers accounted for 15% to 20% of the memory module manufacturer's procurement.
"Demand and supply of DRAM is approaching a balance following the sluggishness for more than a year," President John Tu told reporters during a trip here. "2002 is going to be a bright year" in part as IT demand is rising.
Prices of the mainstream 128 MB DRAM have surged more than 50% since September, mostly due to production cut by Micron Technology, NEC Corp., Toshiba Corp. and other Japanese and South Korean players, according to ING Baring Securities (Hong Kong) Ltd.
Looking forward, the memory module maker expects the price momentum to continue. Scott Chen, director of Asia business development of Kingston, said that it's possible for 128 MB DRAM prices to jump to as much as $8 later this year, compared with about $3.50 currently.
Kingston's view seems too optimistic as it still takes time for DRAM manufacturers to work off their existing inventories, said some analysts. "We forecast the prices will stay at between $3 and $4 over the coming two months," said Chris Hsieh, a senior analyst for ING Baring, adding that the main key to watch in the longer term is whether Micron will succeed in its plan of acquiring Hynix Semiconductor. Talks between those two companies have broken off.
The purchase will allow Kingston to take advantage of Taiwan's lower prices and steady supply. "A module maker like Kingston needs to have long-term and stable supply," said Thomas Chang, a vice president at Mosel Vitelic Inc., Hsinchu, Taiwan. "Kingston wants to use Taiwan as a long-term supplier, making sure they can get the best prices at good times or bad times."
Kingston plans to ship to global customers with the DRAMs -- including 128 MB and 256 MB DRAM as well as double data rate DRAM -- it will buy from Mosel, Winbond Electronics Corp., Powerchip Semiconductor Corp. and Nanya Technology Corp., Chen said. These Taiwanese companies together with two others represent about 10% of the world's output.
Turning to Taiwan also helps Kingston to pay less. DRAMs made by Taiwan companies generally cost 30% lower than those made by bigger rivals in the U.S., Japan and Korea, analysts said.
The increase in Kingston's procurement in Taiwan comes in part after Toshiba exited its DRAM business, Kingston said. Now, Kingston buys 25 million DRAMs per month worldwide.