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Daily Mandarin - Price Wars

You can type the six-digit date September 13th 2015 "091315" to get an auto response vocal recording, pinyin and translation for today's expression.

Today's expression is 價格戰 - price war, the act of continuously lowering prices to undercut competition

Memory chip price war looms as China eyes USA's Micron

Oversupply and a potential price war are threatening the global memory chip industry as a Chinese state-backed buyer eyes US firm Micron Technology

The US firm, currently the world’s third-biggest chipmaker, has reportedly been approached with a $23bn takeover bid by Tsinghua Unigroup, China’s largest chip design company.

If closed, the deal would become the biggest foreign takeover by a Chinese firm. The acquisition would shake up the global memory chip industry, worth $80bn, which is currently dominated by South Korea's Samsung Electronics and SK Hynix, USA's Micron and Japan’s Toshiba.

"When a new player enters the market, who says it's OK not to make money, no good can come from it," said CW Chung, an industry analyst at Nomura.

However, cheaper chips could have a positive effect for consumers as it could reduce the price of mobile devices.

"The bigger worry for the market right now is the risk of market oversupply,” said Jay Yoo, an analyst at Korea Investment. “Micron hasn't been that aggressive in capital expenditure, but there's greater uncertainty as to what happens after a Chinese buyer takes over."

China is the world's largest consumer and manufacturer of smartphones, but has so far relied on imported chips. Acquiring Micron’s cutting-edge manufacturing technology would be a major advance for the country’s still modest chip industry, which Beijing sees as one of vital strategic importance.

In addition to supplying its smartphone manufacturers, a China-based Micron would also help Chinese computer makers including Lenovo and Xiaomi.

"With Micron, China would get access to not only critical DRAM and NAND intellectual property, but also the manufacturing and design know-how that would significantly reduce its learning curve in mainstream memory," JP Morgan analysts wrote in a note.

In 2013, Chinese demand represented more than half of global semiconductor consumption, worth 917bn yuan ($147.7 billion).

Nearly 70 per cent of the dynamic random access memory (DRAM) chips, used as temporary storage of data on computer and mobile devices, are produced by Samsung and Hynix.

Samsung, together with Toshiba, controls also about 53 per cent of the flash-type memory chips market, followed by SanDisk and Micron.

The supply of DRAM chips ballooned by 89 per cent in 2007 when the industry was caught up in huge oversupply as Hynix and Elpida, since bought by Micron, more than doubled their output to squeeze out smaller rivals such as ProMOS and the now defunct Qimonda.

That glut has since eased and supply grew just 19 per cent in 2013, according to Macquarie.

Samsung last year began full-scale production at a new $7bn chip factory in Xi'an, while SK Hynix will next year likely take its cumulative investment in its China plant, which produces about half its total DRAM output, to$10bn.

source: The Engineering and Technology Magazine