Hello Z - and welcome to the thread. As hoped, we are beginning to discuss issues that are of critical importance to the company's fundamentals - I like the direction that this is heading. I too am long MU.
I agree that the DRAM industry is cash flow positive currently and that we are moving into an overall shortage by 2000. My point to the thread has been sub 0.25 micron production capacity is insufficient given the current and future expected demand. Even if investment schedules are ramped currently, it will still be only enough to prevent the shortage from worsening.
I have no doubt that the Koreans are qualified at sub 0.25 micron, and that Samsung are close to the best out there in terms of production technology. The problem is that their chip size reductions are lagging behind that of companies such as MU and Toshiba. In fact most of their output is at a chip size of 100mm2 or above. Design rules unless in context with overall chip die sizes and yields are misleading.
AS far as capex concerned, I have reservations that fund procurement during CY99 will be as easy as it has in the past, still considering that the debt/equity ratios are (I believe) 600% and that the country is still under IMF supervision. The pressure to lower outstanding debt is immense and I think that will hobble any attempt to recover competitiveness in the near term. Everyone, (including Korean banks, the government, IMF, MU and the U.S. government) are aware of how blind over-investment by the Koreans got the economy in the mess it is in now. I do not think they will embark down the same road so soon after the disaster and that roadblocks will be put in place to prevent over-expansion this time.
As for Hyundai/LG, the buyout hasn't even taken place yet, let's give that another two months to work out a price out. Next managements need to sit down and talk about what they have got and where they need to go. Iron out differences (they are wide), agree on technology directions, integrate fabs etc so we'll give that another three to four months. After this they will need to then place orders for equipment, another month allow three-four months for delivery, then set about retooling lines lines (by this stage we are already inlate 99. Then move through beta site, samples then finally a ramp up could take place in early 2000. That is probably when we will see them really pick up their equipment purchases.
In 2000 the combined Hyundai/LG will probably spend well over $1bn in capex. If some of that is slipped into 99 (say if MU decides to give $500m to them), that is fine. I cannot see their profitability (and consequently cash flow) being close to that of Samsung and MU.
I'd be interested on your thoughts regarding the progression of the Korean's chip shrink. Wafer starts, yields, chip sizes if available. TIA.
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