Suppliers Want Cash-Only Sales From Korean Chip Makers
(01/19/98; 9:35 a.m. EST)
By Jack Robertson , Electronic Buyers' News
SEOUL -- Foreign semiconductor material suppliers have put most South
Korean chip makers on a cash sale only basis, throwing a temporary
glitch into 16-Mbit production in this economically troubled country,
according to analysts and DRAM competitors.
A spokesman for the parent of LG Semicon last week confirmed that the
chaebol has been unable to secure overseas credit and it has been forced
to pay cash for material needed to manufacture chips. Analysts and
industry sources said the current banking crisis has left banks in that
country short of foreign currency to issue letters of credit for imports
of critically needed chip materials, such as packaging epoxy, wafers,
headers and processing chemicals.
As a result of the banking crisis, Korean IC makers are forced to buy
the essential chip supplies on a cash-only basis.
The LG Group spokesman claimed his company has been able to pay cash to
acquire all the materials it needs to keep its chip production running
without disruption.
A Samsung Electronics Co. spokeswoman in Seoul couldn't comment on
whether the company was having to buy materials strictly on a cash
basis. She said, "Samsung will do all that is required to keep our
semiconductor business at full operation."
Foreign observers, however, are still stunned that some of the largest
semiconductor producers in the world suddenly find themselves on a
cash-only credit basis. The squeeze is made worse by the steep decline
in the value of the won against the yen and dollar -- forcing the
Koreans to spend far more of desperately short cash.
"It's hard to tell how much of a problem this is, but I suspect it could
be one factor in the lower quantities of DRAMs the Koreans have been
dropping into the spot market since the first of the year,"said Jonathan
Joseph, principal semiconductor analyst for Montgomery Securities in San
Francisco. Joseph said he believed the inability to get letters of
credit to cover imported materials has perturbed some Korean production.
Interviewed in Germany last week, the president of Siemens AG's
semiconductor division speculated that the credit crunch could be behind
recent reports of slightly lower DRAM production levels in Korea . "But
if this is so, it is only a temporary impact," Ulrich Schumacher added.
"How long it lasts depends on how soon the Korean companies can get
letters of credit again."
It is expected that when the current $40 billion short-term foreign debt
is refinanced, the Korean commercial banks will again get access to the
foreign currency needed to back letters of credit. However, unless
Korea's won recovers significantly the nation's chip makers will still
face a severe cost penalty in buying materials from foreign suppliers.
The supply pinch could give a boost to efforts in Korea to up a domestic
infrastructure supporting chip manufacturing, suggested some analysts
and industry sources.
For instance, LG Siltron, already a supplier of blank silicon wafers,
has just opened a second plant in Kumi, Korea. That new facility will be
able to triple production to 3 million wafers a year. LG Siltron had
announced a further expansion to start construction this year to boost
wafer output to 5 million wafers a year. However, that project could be
caught up in the current Korean financial crisis, as the chip industry
sorts out capital spending priorities while trying to pay off phenomenal
levels of debt. |
