Samsung mulls plan to hike DRAM prices

South Korea's Samsung Electronics Co. Ltd. is mulling a plan to raise its DRAM prices, while Taiwan's suppliers have cut production, according to an analyst. Korea's Hynix Semiconductor Inc. has also cut its DRAM production.

Most DRAM vendors are seeing red ink amid a major downturn and a capacity glut. After a stellar 2007, the DRAM market fell into a deep depression starting in 2008.

There are signs of hope in the arena. ''Recent channel checks suggest that Samsung is moving toward raising DRAM prices in the near term by as much as 5-to-10 percent, in an effort to stabilize pricing in the DRAM market following a 75 percent price decline in 2008,'' said Daniel Amir, an analyst with Lazard Capital Markets (New York), in a report.

DRAM prices are nearing production costs, causing Samsung to take action. ''Current 1-Gbit pricing ($0.57) is close to Samsung's testing and packaging costs, and therefore as demand remains weak the company is taking this drastic step in the hope that the rest of the industry follows,'' Amir said.

Will it work? Last year, Japan's Elpida Memory Inc. attempted to raise its DRAM prices for similar reasons, but the action failed as customers reportedly revolted.

Meanwhile, others are cutting production in an attempt to even the supply/demand equation. Hynix, for one, has cut production. Taiwan DRAM makers have taken similar steps.

''In the latest moves in the Taiwanese DRAM industry to address the mounting losses, we have heard further cuts in the past couple of weeks from both ProMOS and Powerchip of an additional 10 percent at the end of December,'' the analyst said.

''We believe that the Taiwanese vendors have now cut an unprecedented 30 percent of their DRAM capacity since the summer. This should have a positive impact on DRAM pricing once demand comes back,'' he added.