ProMOS bucks DRAM trend, raises spending forecast

ProMOS Technologies raised its projected 2007 spending on new memory chip plants this year, bucking expectations that falling DRAM prices might cause companies to rein in such spending.

The Taiwanese chip maker raised its projected factory spending to US$1.8 billion from a previous estimate of US$1.5 billion to US$1.6 billion. Increased factory spending in Taiwan will benefit users because the company's rivals will likely make sure their capital spending keeps pace with ProMOS's, ensuring plentiful chip supplies and continued low prices for DRAM (dynamic RAM) and other memory products.

Prices of the most widely used DRAM chips, 512Mb, DDR2 (double data rate, second generation) chips that run at 667MHz have fallen 66 percent so far this year to US$2.19 each on Thursday, according to DRAMeXchange Technology, which runs an online trading site for the chips. The price is near or below the cost of production for most manufacturers, and far below the US$6.36 price the chips ended at last year.

"Even though prices are falling, we still have to upgrade production lines to new technology in order to cut costs," said Jessie Peng, chief financial officer at ProMOS, in a telephone interview. A large portion of the spending is for a new plant the company expects to ramp up to maximum capacity by the end of this year.

The company also hasn't changed any of its longer term spending plans. "We have to keep up with our rivals," she added.

A number of chip makers in Taiwan have announced ambitious spending plans for this year. But price declines in the DRAM market caused some analysts to predict reduced spending on new chip plants. The ProMOS announcement contradicts these expectations.

Inotera Memories Inc. earlier this year revealed plans to build two advanced memory chip factories in northern Taiwan in an investment estimated at more than NT$200 billion, (US$6.1 billion). Its spending this year is forecast at NT$48 billion, up from NT$40 billion last year.

In addition, Powerchip Semiconductor last year announced a major new spending plan with partner Elpida Memories of Japan. The two companies will jointly invest US$13.9 billion over five years to build four new DRAM factories in Taiwan. The joint venture company, named Rexchip Electronics, is slated to open this year in an advanced 12-inch chip factory.