Samsung, HEI expected to cut chip investments next year
Domestic chipmakers are expected to curtail facility investment next year amid concerns over slowing growth in the global memory market.
According to Dresdner Kleinwort Benson (DKB), Hyundai Electronics Industries (HEI) has recently readjusted its investment plan amid cash flow problems and falling dynamic random access memory (DRAM) prices.
The company is expected to reduce 2001 plant investment to 1.5 trillion won from its original plan of 2 trillion won. The brokerage firm said HEI will slash output of the commodity chips to 1.1 billion from 1.25 billion per year, leading to a 2.4 percent decline in total DRAM shipments.
Samsung Electronics, the largest DRAM maker, is also considering cutting investment in semiconductors and LCD production in 2001.
The company had planned to spend 7.8 trillion won in expanding output. But sources said the amount could fall to as low as 5.5 trillion won, if low DRAM prices are maintained during the fourth quarter.
ING Barings projected that Samsung is likely to reduce its original investment by approximately 13 percent.
The two firms' reduction in investment, which could reach 3 trillion won, will deal a blow to Korea's economy, which relies heavily on chip exports, said Jon Woo-jong of SK Securities.
The move is largely designed to stabilize the DRAM market. A recent supply glut and slowing PC sales have driven down the prices over past months.
The spot market prices of 64M DRAMs fell to below $4 this week. According to sources, 64M DRAM PC 100 chips were trading at $3.85-4.08 Monday, a decrease of 4.94 percent from previous day, while the prices of PC 133 also shed 20.2 percent to $3.95-4.19.
The next generation memory 128M DRAMs remained unchanged Monday as PC133 chips were quoted at $7.75-8.22 and PC 100 at $7.4-7.84.
Analysts said their cut in investment is expected to improve supply and demand situation next year, seeing possibilities for the prices moving up.
ING Barings said Korean manufacturers' DRAM output next year would likely be reduced by approximately 10 percent. The retrenchment will have a positive effect on the chipmakers outlook, it added.
HEI recently announced plans to raise 3.5 trillion won through loans and sales of assets by the end of 2001 to reduce its debt. The company is expected to scrap its plan to increase the output capacity of its eighth production line in Chongju, North Chungchong Province, which would have required 1 trillion won in investment.
According to ING Barings, Samsung is likely to delay operations of its 12-inch wafer plant and a new LCD line, which would require a fresh investment of 1.2 trillion won and 900 billion won, respectively.
By Hwang Jang-jin Staff reporter |
