08/16 03:47
Nokia to Buy DRAMs Exclusively From Korea's Samsung (Update4)
By Youngsam Cho
Seoul, Aug. 16 (Bloomberg) -- Nokia Oyj will buy all of the memory chips for its most advanced mobile phones from Samsung Electronics Co., a move that could reduce the reliance of Korea's largest company on a shrinking global computer market.
The biggest maker of mobile phones agreed to purchase all of its 64-megabit dynamic random access memory chips from the world's No. 1 DRAM maker, Samsung Electronics said. Nokia will use the chips in mobile phones with Internet access, address books and other functions previously reserved for computers.
While most mobile phones now don't use such a powerful chip, ``by 2004, 300 million phones will be using DRAMs,'' said Kevin Jeong, a company spokesman. ``Nokia's agreement to purchase its chips from Korea will probably help others to follow suit.''
Samsung is now the only chipmaker that is manufacturing DRAM chips for mobile phones, hoping to get a head start as networks allow faster communication links and computer chips use less battery power. Nokia started including Samsung's DRAMs in phones with many computer functions in June and trials are underway in Japan for wireless Internet links as fast as a fixed line.
``This is good news for Samsung but it's too early in the technology's stage of development for it to affect its shares,'' said Seo Jung Ho, who holds the stock as part of 1.2 trillion won ($938 million) in assets he helps manage at Daehan Investment Trust Management Co. in Seoul. ``Investors are focusing more on when demand for PC chips will recover.''
Nokia spokesman Tapio Hedman declined to comment on the mobile-phone maker's relationship with Samsung, adding though that DRAMs will likely be used in Nokia's most advanced products.
Helsinki-based Nokia, which has a 35 percent market share in mobile phones, is maker of the Nokia 9210 Communicator, a device combining the functions of a mobile phone with a pocket computer. The Communicator, which works on the Symbian operating system, is designed to accompany Microsoft Corp.'s Office software.
Growing Market?
Samsung Electronics declined to give specific estimates for Nokia's requirements or when the contract expires. The Korea Economic Daily earlier reported the agreement.
Samsung is also in talks to provide the chips, which sell at about $8 a chip -- or 10 times the price for those used in computers -- to other mobile phone makers, including Motorola Inc. and Germany's Siemens AG, said Kim Kwang Tae, Samsung's director of corporate communications.
Nokia may want DRAM chips to replace the static random- access memory chips -- which are faster and consume less energy but are more expensive than DRAMs -- predominantly used today to store phone numbers and other types of data. It began selling units using DRAM chips, specially modified to consume less power, in its new ``smart-phone'' models since June, Jeong said.
``The market will eventually get bigger but it's going to take several years for it to become dominant,'' said Hwang Min Seong, an analyst at ABN Amro in Seoul. ``Mobile phones won't replace computers as the main source of chip demand for the time being.''
Hynix Semiconductor Inc., the world's third-largest computer- memory-chipmaker, said it will unveil its own type of mobile phone chip under the name of ``pseudo-SRAM,'' in the next two months, said company spokesman Kim Seung Soo.
Mitsubishi Electric Corp., Japan's third-largest mobile phone maker, and NEC Corp., maker of the country's most popular mobile phone, are developing chips combining features of DRAM and SRAM. Compared with SRAM chips, the devices will have greater memory capacity and will cost less to make. The chips will also consume less power than standard DRAMs.
Computers Still Dominate
Samsung Electronics' second-quarter net income fell 45 percent from a year ago as demand and prices of its main product, DRAMs for computers, fell. Spot prices of 64 MB DRAM chips have dropped 70 percent this year.
For the first time, sales of Samsung's mobile phones and phone systems during the second quarter overtook semiconductors as the company's best-selling product category, as global demand for computers slumped and computer prices plunged.
Global PC sales fell in the second quarter from a year earlier, the first decline since 1986, market researcher Dataquest Inc. said.
Mobile phone sales worldwide may fall 8.6 percent this year for the first time in the more than two decades to 370 million units as economies slow and consumers wait for newer Internet- linked models, according to Morgan Stanley Dean Witter.
Samsung Electronics shares, up 23 percent this year, fell 2500 won, or 1.3 percent, to 195,000.
