Korean Electronic Giants Put Brake on Investments
December 11, 1997 (SEOUL) -- Korea's leading
technology investors, hit by the fallout from the country's
financial crisis, are facing a severe setback in their march into global
markets.
Even as Korea's allies and the International Monetary Fund (IMF)
begin to carry out an emergency transfusion of nearly US$60 billion in
the world's largest bail out effort, Korean conglomerates, including
major electronics makers, are putting a brake on their global
investments. (see keyword)
The future of several multi-billion-dollar, high-tech projects has been
thrown into doubt.
Samsung Electronics Co., Ltd. said an expansion at its Austin, TX,
memory facility, which was scheduled to start production in December
as part of a US$1.3 billion project, may be delayed.
AST Research Inc., Samsung's PC unit based in Irvine, CA, launched a
reorganization plan including a 37 percent cut in its 3,000-strong work
force in a move to consolidate operations in North America, Europe
and Asia.
Samsung also is shelving a 450 million pound expansion plan at its
northern England plant where it produces consumer electronics,
including televisions and computer monitors. And the company's plan to
invest some US$1.6 billion in China's electronics industry has been put
under review.
LG Electronics Inc. has put on hold the bulk of its US$2.85 billion
investment project based in Wales. The company said its plan to build a
US$2.25 billion semiconductor plant will be delayed.
Hyundai Electronics Industries Co., Ltd. said part of its US$4 billion
semiconductor plant in Scotland will be ready for production by the end
of 1998, with the rest of the project put under examination due to
volatile economic conditions at home.
Daewoo Electronics Co., Ltd. is delaying plans to invest in three new
French plants worth a total of 1.8 billion French francs. Daewoo
announced the television components projects in the depressed
northeastern Lorraine area in March.
These are the most clear signs yet that many Korean conglomerates are
slashing their global investment plans in the wake of the country's
economic turmoil.
Corporate financing and investment plans must now change according
to drastic changes in Korea's economic situation.
The country's financial markets are facing a melt down due to a massive
credit crunch amid large-scale corporate failures.
The Korean won has lost some 25 percent of its value against the U.S.
dollar in 1997.
Most Korean conglomerates are planning to slim down and focus their
business lines to brace for economic hardships.
The Samsung and Hyundai groups said they will cut their 1998
investment by at least 30 percent each.
LG and Daewoo also are considering similar reductions in their
worldwide investments in 1998.
The Dongbu group, one of the country's major business conglomerates,
has postponed its 2 trillion won semiconductor project.
Dongbu said in early November that it will build a semiconductor
manufacturing facility matching those of leading chip makers such as
Samsung and LG in cooperation with IBM Corp.
But its financing plan, which calls for massive loans from domestic and
foreign financial institutions, has run into trouble, as the Korean crisis
devastated investor confidence in Korean industry.
Keyword: Korean companies' global investment
Korean companies have been raising their stake in world markets
aggressively in recent years, but the trend is changing as the country
faces increasing economic difficulties. According to the central Bank of
Korea, foreign direct investment projects newly launched by Korean
companies in the first nine months of 1997 were worth a combined
US$2.67 billion, down from US$2.89 billion a year earlier. The figure
was US$3.93 billion for the whole of 1996, the largest ever in the
history of Korean investment abroad. (return to news)
(James Lim, Asia BizTech Correspondent)
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