Samsung steps up spending
May. 07, 1999 (Electronic Buyers News - CMP via COMTEX) -- Moving back
to an aggressive spending program, Samsung Electronics Co. Ltd. said it
plans to double its capital expenditures this year, scrapping an
earlier plan to keep costs down.
The Korean memory-chip giant has boosted its capital budget to $1.8
billion, from about $900 million last year.
News of the spending increase concerned some industry watchers, who
noted that DRAM prices are falling again amid a global oversupply of
certain devices. They believe that Samsung specifically is battling
Micron Technology Inc. for market-share leadership.
"These giants are positioning themselves now, no matter how bloody
the process, to be market leaders whenever DRAMs turn around," said
analyst Bill McClean of IC Insights Inc., Scottsdale, Ariz.
Not so, according to Avo Kanadjian, vice president of memory
marketing for Samsung Semiconductor Inc., San Jose. The spending
increase "merely returns Samsung to traditional capital-spending levels
of a little over $2 billion annually in the several years before 1998,"
Kanadjian said. "Because of the Asian financial crisis, last year's
sharp reduction in capital spending was abnormal."
Samsung's original 1999 budget had appropriated $1 billion for
capital spending, and the company upped the ante another 20% in
February, before settling on the final number this month.
Kanadjian said the increased funds will be used to build Line 9 in
Kiheung, Korea, as well as to upgrade other existing fab lines.
Line 9 will start production late in the third quarter with a
capacity of 16,000 8-in. wafers per month, using 0.18-micron
processing, according to Gurinder Kalra, an analyst with Morgan Stanley
Dean Witter in Hong Kong. A major share of the expenditures, he said,
will go for production of next-generation devices, particularly 128-
and 256-Mbit chips and Direct Rambus DRAMs.
"We aren't adding capacity just in mainstream DRAMs, which are
already in oversupply," Kanadjian said.
Samsung has already expanded its fab in Austin, Texas. When the
facility is operating in full swing in several months, its total
capacity will double to 25,000 wafer starts per month, according to a
spokesman for the fab.
Morgan Stanley estimates that Samsung will produce 260 million
64-Mbit DRAMs and 45 million 128-Mbit devices in 1999. Only Micron and
the Hyundai/LG Semicon merged company will be in the same DRAM league,
said Mark Edelstone, an analyst at Morgan Stanley in San Francisco.
"These three firms will control 75% of the global DRAM market by the
end of the year, changing the entire shape of the market," he said.
The recent price drop for 64-Mbit SDRAMs hasn't affected Samsung as
much as it has some competitors, Kanadjian said, adding that his
company is still strong in older DRAM types, such as EDO and 16-Mbit
chips, which are enjoying price gains.
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