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John H Isacs, Taipei Taiwan DRAM Industry In the second week of December 1998, the US International Trade Commission (ITC) made a preliminary ruling to continue investigations into dumping charges against Taiwan. The ITC board members in a unanimous 5 to 0 vote established that “there is reasonable indication” of injury to the US semiconductor industry due to the sales of Taiwan-made DRAM chips “at less than fair prices.” The board cited evidence that cheap computer chips imported from Taiwan are harming the US industry enough to warrant consideration of punitive duties. The DRAM inquest was initiated in October 1998 by the ITC after the US chip producer Micron Technology Inc (www.micron.com) cited 13 Taiwan companies as unfairly dumping chips on the US market. Micron is the world’s second largest producer of ICs. This was not the first time the Idaho-based US chipmaker has filed complaints with the ITC against the Taiwan industry. Earlier in 1998, Micron issued a similar complaint concerning SRAMs from Taiwan which resulted in punitive levies of up to 113.85% being put on Taiwan made SRAMs entering the US market. Statements issued by the Taiwan government and several of the Taiwan companies cited in the ITC ruling generally underplayed the significance of the ruling. Director general of the Board of Foreign Trade (BOFT), Chen Ruey-long, said the actual impact of the ruling is limited. “The impact will be more psychological than actual,” Chen claimed. The government’s position is that while unfortunate, the possible unilateral action does not pose a grave threat to the Taiwan DRAM industry. Others, outside of the government aren’t as sure. Larry Liu, a long time industry observer, believes the action may pose a significant threat to an industry already suffering from an industry downturn. “If the US does follow through with punitive damages, the price competitiveness of our industry will be negatively affected. Export prices to the US will be much higher and this in turn will negatively impact the companies’ earnings. All things considered, this is the wrong time for this to happen to the Taiwan industry. Of course the companies themselves and the government are down-playing the potential damage of any action, but I believe it’s a very menacing threat.”
Investors Worried The TAIEX, Taiwan’s leading stock index, fell December 8, 1998 the day after the ITC DRAM dumping announcement. Acer Inc (www.acer.com.tw) fell 1.7% while Vanguard International Semiconductor Corp (www.vis.com.tw) dropped 3%. Chip-related stocks led the market down as investors worried about Taiwan’s competitive position if punitive damages are levied by the ITC. Larry Liu, comments, “This may be more serious and more damaging than the SRAM ruling. Taiwan exports of DRAM chips are strategically more important than SRAM chips. The SRAM action was mitigated by the fact that most Taiwan SRAM chips are sold to Taiwan manufacturers which are then exported as ‘complete’ PCs and therefore not subject to the punitive damages. The dynamics of Taiwan’s DRAM sales are not as protected.” Compounding the fears of dumping charges against the local DRAM industry is the overall poor market outlook for the products. Prices for DRAMs have fallen almost 95% over the past two years and while the prices seem to have stabilized, investors worry about the ability of Taiwan’s DRAM industry to be profitable based on the present price levels. The government of Taiwan, underscoring the importance they place on the semiconductor industry, throughout December 1998 poured government-controlled funds into the market to support chip stocks. Despite these actions the performance of stocks related to the semiconductor industry followed the general market downward. While recent ITC rulings and industry weakness have hurt Taiwan and Korean DRAM companies, prospects for Micron have been looking up. In the fourth quarter of 1998, while dumping charges were filed against Taiwan and Korean companies, the company’s stock price rose by 50%.
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