Korean Chip Issues Take Beating Due to Unfounded Oversupply
Korean chip makers, mainly Samsung Electronics and Hyundai Electronics Industries, have been taking a beating due to unfounded rumors that there will be a supply glut in the market.
The rumors are based on a report from American investment banker Merryl Lynch, which said chip makers are investing heavily in new facilities and this is certain to create an oversupply soon.
While the Korean stock market itself has been down, shares of Samsung Electronics, Korea's most powerful and profitable corporation, have fallen from around 380,000 won to just over 300,000 won.
The problem, industry analysts said, is that stock investors apparently are not informed about which sector the facility investments are being made in and whether or not Korean chip makers will be affected.
``Basically, Korean chip makers primarily deal in memory devices and only limited investments are being made in this sector, leading to an expected increasing shortage,'' one analyst said.
He went on to say that some 20 trillion won worth of investments are expected to be made in the semiconductor industry this year but most of this is concentrated in facilities for producing flash memory and non-memory devices for digital electronics.
While non-memory makers like Intel, NEC, Hitachi and Toshiba are planning investments of 16 trillion won, all DRAM (dynamic random access memory) producers are doing is upgrading their lines.
Samsung Electronics, for example, has advanced the operation of a new factory for full-fledged commercial production early next year, but the application of the 0.17 micron design rule has been unstable and it looks like production will not show any drastic increases in the near future.
Also, supporting industries estimate that there will be shortages rather than oversupplies, as in the case of Dataquest, which said recently that the shortage of 1.3 percent for the 64 megabit DRAM chips in the third quarter will worsen to 3.9 percent in the fourth.
``All indications are that there will be continued shortages and this is keeping the prices of DRAM prices high in the international spot market,'' said one Samsung official.
And even with Samsung projected to make an unprecedented profit of 7 trillion won this year, the chip maker's shares remain clearly undervalued and some securities said recently that they would fetch 750,000 won if market conditions are right.
2000/07/25 17:37 |
