Intel confirms DRAM no-show

Last week, the Taiwanese press got awfully excited about Intel entering the DRAM market in tandem with local suppliers.

Apparently, Intel was to build two 12in wafer plants in Taiwan and would start pumping out DRAM in three years, the Commercial Times said. Our content partner ComputerWire expressed doubts about the veracity of the report.

It scepticism was justified. Yesterday Intel COO Paul Otellini told a press conference in South Korea that the company had no plans to enter the DRAM business. The thought of Intel building DRAM fabs is so outlandish that one would have thought that Intel would not need to issue a denial, in the way that it would not need to deny that it was building space ships for the little people of Mars (which we know for a fact is true).

But last week's DRAM drama is the sort of rumour which could seriously damage a self-respecting semiconductor firm's share price. So perish the thought: Intel typically works to gross margins of 50 per cent-plus, it has only one serious competitor - AMD at the low-end, and it has good prospects and even bigger margins at the medium/high-end with Itanium 2. Here it has two competitors - IBM and Sun/SPARC.

The DRAM market is bombed, there are loadsacompetition at the volume end and - except for the very important question of reliability - little to differentiate the competition. And Intel has been in the DRAM market before - it saw the inflection point and made its exit when the far Eastern makers started motoring. Besides with the amount of cache on Intel chips these days, Chipzilla is a significant memory "producer" in its own right.

Other news from Otellini's SK press conference. He squashed local speculation that the firm was to embark upon a $10bn investment programme in the country. Intel is currently evaluating needs for more production, but right now there is enough capacity in the US and Ireland. And Intel is "nowhere near to making a decision" on where any new fab would be, he told SK's press corp, financial newswire AFX reports.

Otellini also expressed cautious optimism about an upturn in the PC industry, cautious because it revolves around "getting at a point where we can start thinking the three- four -year natural corporate PC replacement cycle will start to kick back in sometime in the not too distant future," he said.

Corporates account for 65 per cent of PC sales, but pinning hopes on a upturn around the fact that their kit, maybe bought in the last PC buying splurge before the Y2K, is now so knackered that owners have no choice but to upgrade.

For a proper PC industry upturn, corporate and consumer confidence will need to revive, Otellini points out. No sign of that just yet. ®