SEVENOAKS, England -- Europe has its own name for it--DRAM Fubar--but it's hitting the European chip market as hard as it is the global semiconductor business. "Fubar" is a term coined by military strategists that translates roughly into "fouled up beyond all reason," comments Malcolm Penn, CEO of Future Horizons, a chip analyst firm here.
The renewed DRAM price war between Micron Technology Inc. and the South Korean DRAM makers has caused a 50% drop in DRAM prices in Europe--from $8 to the $4 area for a 64-megabit DRAM, he says. "At these prices, nobody is profitable, and the balance sheets show it," Penn says. It's all about "who's going to be No. 1 in worldwide DRAM production, whatever the cost."
The DRAM market won't recover until the Korean-U.S. price war ceases or demand finally catches up with supply, Penn says. As a result, DRAMs will limit this year's European chip market to a 11% increase, he forecasts, taking as much as a 3-to-4 percentage points off overall chip market growth.
But DRAMs aside, the rest of the European chip market is performing well, he notes. All indicators, Penn says, confirm that the chip recovery "is definitely in place." Lead times are starting to push out, he adds.
Like others, Penn is looking ahead to a wafer fab capacity shortage in the 2000-2001 period. This will happen because of the 30% cutback in new plant and equipment last year. There's no way to avoid a shortage now, he says, other than a major slowdown in market demand.