Korean chip makers claim Micron
caused DRAM glut--not them
By Jack Robertson
WASHINGTON--Korean chip makers fired back in their own position
paper, which said U.S.-based Micron Technology Inc. caused much of
the global DRAM oversupply by tripling its production in 1997 to 30
million chips a month.
The Korea Semiconductor Industry Association (KSIA) maintained in
the document that DRAM firms in South Korea have cut capacity
expansion plans this year by 40-to-50%, in contrast to Micron's
continued production rampup. "Micron is a [DRAM] price leader,
supplying chips at low prices, aggravating the oversupply in the
DRAM market and precipitating a worldwide price drop," the document
alleged.
The white paper said LG Semicon Co. Ltd. in 1998 plans to cut its
originally planned capacity expansion plans by half, while Hyundai
Electronic Industries Co. and Samsung Electronics Co. will reduce
capital expenditures by 40%. The latest KSIA estimates on chip firm
cutbacks exceeded previous financial analyst projections of a 33%
reduction.
The group challenged Micron's contention that Korean over-expansion
had prevented the U.S. chip maker, based in Boise, Idaho, from going
ahead with its projected new fab in Lehi, Utah. "Micron's problems
with the Lehi facility are due to Micron's poor financial planning
and timing, not Korean competition. Operation of the Lehi facility
has been delayed because of a downturn in the semiconductor industry
and because of Micron's erroneous business forecast of market
demand. These factors are completely unrelated to Korean
manufacturers," the position paper said.
The association denied charges by its U.S. counterpart, the
Semiconductor Industry Association (SIA), that Korean suppliers had
dumped DRAMs in the United States. Its document reiterates the
Korean position that a six-year-old U.S. DRAM dumping case against
Hyundai and LG should have been dropped under the U.S.'s own trade
regulations because both firms were cleared of any dumping for three
consecutive years through April 1996. The Koreans carried this
complaint to the World Trade Organization, where a panel study is
pending.
The KSIA didn't mention last month's preliminary finding of dumping
against Hyundai and LG during the 12-month period, which ended April
30, 1997.
The Korean association said its member companies have offered to set
up a fast-track monitoring procedure on calculating chip production
costs similar to an agreement they have with the European industry
and similar to the procedure the SIA has with Japanese chip makers.
However, the white paper said the U.S. industry has steadfastly
rejected the Korean proposal. "Micron prefers to advance its
groundless allegations [rather] than to resolve the dispute in a
reasonable manner," it states.
The KSIA white paper was in response to the SIA's and Micron
chairman Steve Appleton's testimony to Congress accusing the Koreans
of subsidized chip-capacity expansion, leading to the global glut.
The SIA issued its own position paper demanding that no
International Monetary Fund (IMF) bailout money be used to rescue
Korean chip companies. The SIA document also urged the Korean
chaebols to change their accounting procedures to reflect
currency-exchange losses that allegedly distorted profit-and-loss
statements.
The Koreans said no IMF funds will flow to chip makers in that
country, but money will be used solely to assist the central bank of
Korea. "Private firms will continue to borrow money primarily in
international financial markets based on their own credit ratings.
These private loans are completely unrelated to the IMF loans," the
KSIA asserted.
The association also said the Korean chip makers are already using
internationally accepted accounting standards. It rejected the SIA's
contention that profits are inflated because the firms amortize
currency losses on long-term debt over the life of the loan. "The
rationale for the Korean standard is that, unlike U.S. firms, Korean
firms commonly obtain long-term loans in a foreign currency. Thus, a
small fluctuation in the foreign exchange rate may significantly
alter the value of a firm's debt," the position paper said.
The association noted that the U.S. Department of Commerce, as part
of its recent SRAM dumping case, did accept--and even praised--the
Korean method of amortizing currency exchange losses on long-term
debt.
A Micron spokesman said the Koreans were in error on their
counter-charges against the U.S. chip maker. "Micron never expanded
capacity or wafer starts in the last year as the Koreans did
massively. We achieved a higher number of chips solely through
shrinks using existing production lines. As to delay of the Lehi
fab, Micron's timing wasn't faulty. We saw the global oversupply
coming, and felt we couldn't responsibly go ahead, unlike the Korean
firms which continued to add huge capacity even in the midst of the
world oversupply."
As for Korean charges that Micron helped precipitate the DRAM price
slashing, the spokesman said Micron last year was the only producer
not selling at a loss. "We could charge a fair-market-value low
price because we are the lowest-cost DRAM producer in the world."
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