In a reversal, Samsung increases capital spending
By Jack Robertson
SEOUL, South Korea (ChipWire/EBN) -- 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 memory-chip giant has boosted this year's 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. in Scottsdale, Ariz.
Not so, according to Avo Kanadjian, vice president of
memory marketing for Samsung Semiconductor Inc. in
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, South 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 eight-inch 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-megabit 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, Tex.
When the facility is operating at full strength 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 merged
Hyundai-LG Semicon 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. |
