Editorial: Koreans are neither down nor out
By Jack Robertson
Electronic Buyers' News
(02/26/99, 11:10:48 AM EDT)
Korean chip makers are ramping up capital investment again, boosting spending on new production equipment to roughly $2.6 billion this year.
That's bad news for Japan, where financially strapped chip companies will be forced to hold down capital spending for the second year in a row. It also means that the Korean chip industry-no matter how the merger between LG Semicon Co. Ltd. and Hyundai Electronics Industries Co. Ltd. shakes out-won't give any edge to Micron Technology Inc. or the upstart Taiwan foundries.
The increase in equipment spending in Korea will be devoted primarily to upgrading existing fabs, said Chi-Luck Kim, president of the Korean Semiconductor Industry Association. As Micron has proved, converting production lines to advanced, state-of-the-art technology can increase DRAM output almost as much as building new fabs.
Both Samsung Electronics Co. Ltd. and Hyundai are making DRAMs on 0.22-micron processes, the same as Micron. The trans-Pacific rivals are each starting to ramp up 0.18-micron production, which yields another 25% to 30% DRAM chips out of an 8-in. wafer.
In addition, Samsung is starting to install a 300-mm-wafer pilot line at its Kiheung complex, and Hyundai is planning its own 300-mm pilot project at an empty LG facility that it expects to gain in the oft-delayed acquisition.
The next step to volume production of 300-mm wafers is still several years away, but when that comes, the Koreans will obtain two-and-a-half times more DRAM chips per wafer than with existing 200-mm (8-in.) substrates. Micron is playing its usually cautious game regarding 300-mm, but isn't likely to let the Koreans beat them to the punch when the next-generation wafers hit the fab track.
So where are the Koreans coming up with the money to support the capital-spending increase? Part of the funds are coming from increased cash flow, as sales revenue has grown due to stable and even slightly higher DRAM pricing. The Koreans also continue to lean on suppliers for whatever assistance they can get, and have raised heaps of cash through securities offerings in the past six months.
Japanese banks also reportedly are attracted by higher interest rates in Korea to finance some chip investments. Ironically, these loans put the Korean chip makers in a stronger competitive position against Japan Inc. Korean companies still carry debt loads that seem staggering by U.S. standards. But the plucky Koreans continue to amaze the rest of the chip world by still operating on the mantra that money is no object to staying atop the DRAM business.
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