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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Justa Werkenstiff who wrote (4929)5/3/1999 8:28:00 PM
From: Justa Werkenstiff  Read Replies (1) of 15132
 
** Semi Equips ** Samsung to increase capex and more:

--SUMMARY:--------------------------------------------------------------
Samsung increases semiconductor capital expenditures from 2.1 to 2.5
trillion won.
Hyundai on the other hand, due to its financial structure, maintains capex
flattish at $750 million.
Quite interestingly, the drop in DRAM prices has strengthened the resolve
of a leader like Samsung to spend.
Our top picks are AMAT, KLAC, and ESIO.
--OPINION:------------------------------------------------------------------
Korea Takeaways

Samsung Increases Capital Spending Forecast.

Semiconductor capital spending up from 2.0-2.1 trillion won to 2.5
trillion won. Company spent 1 trillion won in 1998.

Samsung is attempting to aggressively ramp up sub 0.20 micron capacity in
an attempt to keep pace with Micron. The Hyundai-LG merger also creates
a powerhouse with a market share similar to Samsung's and hence the capex
step-up.

One trillion won rights issue solves the liquidity concerns.

Company's capital spending is predicated on an average 1999 64 Mb DRAM
price of $7.0-$7.50 (with a $6 price exiting 1999)

Line 9 2nd round orders (10 k wafer capacity) on schedule for second half
of 1999.

TFT LCD business is slightly profitable at current prices.

Capacity
98 year end - 0.30 micron - 60%, 0.23+0.21 micron - 20%
99 year end - 0.23 micron - 70%, 0.21 - 10%.

0.18 micron ramp gated by 128 Mb/ 256 Mb schedule.

0.21 and 0.18 micron ramps going on schedule with usual learning curve
problems. Nothing out of the ordinary.

Line 10 will be the next major fab - undecided on 200 mm/300 mm
decision. However R&D evaluation is in progress.

Copper production equipment will be installed in Line 5 for logic
capability.


Hyundai

Capital Spending Is Flat

Hyundai is committed to keeping total capital spending flat at 1 trillion
won. Semiconductor cap. ex. is 75% of the total.

Most of the spending for Hyundai, Oregon is complete with a modest amount
in 1999 - $120 million. (1998 Hyundai, Oregon, spending was $280 million).

Hyundai, Oregon - transition from 0.28 micron to 0.22 micron (100%
complete by 4Q99)

Hyundai, Fab 7 - 0.22 micron transition will be 100% complete by 3Q99.

By June-99, close to 65% of the output will be 0.22 micron and over 90%
of the output is expected to be 0.22 micron by the end of 1999.

Memorandum of understanding will be signed with LG this week followed by
contract closing in June and a new legal entity by Oct. 1st.

Company expects a 1-2 year transition period to consolidate manufacturing
facilities (from next generation 256 Mb DRAMs in all likelihood).

Company expects DRAM prices to pick up again in 3Q and 4Q99.

Unlike Samsung, company's financial structure is not as good and hence
the "flat cap. ex." forecast.

Further drop in DRAM prices will affect the combined company's current
capex spending commitment.
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