Memory chip producers tightening belts despite booming market
Korean memory chip manufacturers are expected to rake in huge profits this year, but there appears no relaxation in their belt-tightening drive that started last year as part of restructuring efforts.
Company officials said most of the profits will be either reinvested, kept as retained earnings or used to improve financial structures, with only a small fraction to be used to improve employees' welfare.
This frugality is in sharp contrast with the attitude in 1995 when they earned record profits amid an unprecedented memory chip market boom. At that time, they allocated a large chunk of profits in the form of allowances to employees.
For example, Samsung Electronics, which garnered 2.5 trillion won in net profit in 1995, provided employees with allowances for foreign language training, golf lessons and medical checkups for their family members.
But the boom was short-lived and was followed immediately by a long and deep recession. Then in late 1997, the foreign exchange crisis hit the nation, sending chip manufacturers scrambling to cut not just fat but also some bone. Samsung lowered workers' welfare to the levels of the 1980s and cut the payroll by 15,000 workers.
"They are determined not to repeat the same folly," said an industry watcher. "The bitter memories of 1996 and thereafter are still vivid in their mind."
A Samsung official said the company has no intention of stopping its thrifty stance simply because the chip market has switched to a boom. "The company will not provide gifts to employees on the occasion of Chusok holiday. It doesn't have any plan to offer performance bonuses, either," he said.
Samsung plans to reinvest most of its profits in R&D and facility renovation in its main business fields - semiconductors, LCDs, telecom equipment and home electronics. It has expanded its investment plan for this year from 2.5 trillion won to 3.5 trillion won.
Hyundai Electronics Industries and Hyundai MicroElectronics, formerly LG Semicon, registered losses in the first half of the year because of work stoppages related to their planned merger.
For the whole of this year, they are expected to register profits, small as they may be. "Any profit to be made this year will be reinvested or used to improve the balance sheets. No bonus is planned to boost employee morale," an official said.
Updated: 09/07/1999 |
