Wish You Weren't Here
Taiwan chip makers are rooting for the demise of South Korea's moribund Hyundai Electronics
By ASSIF SHAMEEN and LAXMI NAKARMI
asiaweek.com
At a small Taiwan memory-chip company near Taipei, two senior executives recently sat around brainstorming possible strategies for surviving the global tech wreck. They could slash prices. They could expand capacity in higher-end chips for servers. But better yet, the two men fantasized, why not just hope that some competitors go bust?
Their favorite candidate for an early exit is South Korea's Hyundai Electronics. The world's third-largest memory-chip maker lost $1.96 billion in 2000 and is now barely able to make interest payment on its $9.5-billion debt. "Take Hyundai out of the picture, and it could be an early Christmas," says one of the Taiwanese executives.
It's not all wishful thinking. Hyundai churns out about 16% of all the dynamic random access memory chips (DRAMs) made in the world. Its six smaller Taiwan rivals, including Winbond, ProMOS and Powerchip, collectively account for slightly more than 17%. So if Hyundai collapses, the Taiwanese and DRAM makers elsewhere will gain some breathing space — at least temporarily.
In an all-out fight for survival, Hyundai's CEO Park Chong Sup is now desperately trying to rewrite the company's play book. His top priority: rolling back its recent debt-financed expansion. Park has put Hyundai's telecom and flat-panel display divisions on the block to trim its interest-bearing debt by $729 million before the end of the year. In the process, the company will shed 5,000 of its 22,000 workers. "We need no less than a serious amputation of cancerous units," he says. "It is a battle for survival."
He may have chosen the wrong strategy. What Park is attempting to do is akin to "training a gorilla to become a fashion super model," scoffs one Hyundai employee. Plus, the ongoing global technology bloodbath has put an ugly stain on his master plan. Park concedes that the price Hyundai is fetching for mainstream 64-megabit DRAMs is way below its cost to produce them. "If I can get $3 or a bit higher, I will be okay," he says. But in the open market, the chips were selling for $2.20 each as of Feb. 28.
Still, Taiwan chip makers probably won't be popping champagne corks any time soon. Analysts say Seoul won't let Hyundai Group affiliates fail because the conglomerate has been the most enthusiastic corporate backer of its efforts to open up North Korea. "So long as Kim Dae Jung is president, the government will maintain support," says a Western banker in Seoul.
That may be so, but many industry insiders believe that Hyundai is fated to die a slow death. The company simply has no money to fund research and development of next-generation chips and to build new fabrication lines. Thus, it will continue to lose market share and bleed more red ink. The Taiwanese, for their part, are doing all they can to drive the final nail into Hyundai's coffin. According to ING Barings analyst Chris Hsieh, some Taiwan chip makers are now dumping their 64-megabit DRAMs for about $2 each in the very hope of knocking off Hyundai.
— With additional reporting by Charles S. Lee |
