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To: Greg Thornton who wrote (47091)	7/13/1999 2:53:00 PM
From: DJBEINO	Respond to of 53903

South Korea's Hyundai Says Hitachi Explores Tie-Ups By Yeom Yoon-jeong SEOUL, South Korea (Reuters) - Japanese chipmaker Hitachi Ltd (NYSE:HIT - news). and South Korea's Hyundai Electronics Industries Co. are considering forming an alliance in research and development, Hyundai's president said Tuesday. ''Hitachi has cautiously asked us about all possible alliances in the future like R&D and marketing,'' Kim Young-hwan, president and chief executive officer at Hyundai Electronics, told reporters. ''But it's at a very early stage now.'' Kim said Hyundai and Hitachi have been in talks on transferring technology used by LG Semicon, which has been taken over by Hyundai Electronics. Hitachi first tied up with LG Semicon in 1989, providing technology to make one megabit dynamic random access memory (DRAM) chips. Hitachi had also cooperated with LG on 64 megabit DRAM technology. Hyundai last week completed the acquisition of LG Semicon from LG Group for 2.56 trillion won ($2.16 billion), to create the world's largest memory chip company after rival Samsung Electronics Co Chang Dong-kook, Hyundai's senior executive vice president and chief financial officer, told Reuters the acquisition was likely to see two LG shares exchanged for each Hyundai share. LG Group agreed in January to sell the chipmaking unit to Hyundai as part of a government-led restructuring effort to reduce overcapacity in the key semiconductor industry. Kim said economies of scale, especially in research and development (R&D), were essential to survive in the world semiconductor industry, now facing major consolidation. Japanese chipmaking giant NEC Corp (Nasdaq:NIPNY - news) and Hitachi had agreed a broad alliance in June, aimed at sharing their hefty development costs for new DRAM chips. ''Risks on investment will go higher, while a huge amount of money needs to be invested in the business,'' Kim said. ''I expect a shake-up in the industry in the coming two or three years.'' He said Samsung Electronics, Micron Technology, Hyundai/LG and an alliance between Hitachi and NEC Corp would lead the world chipmaking industry. Hyundai said it would operate Hyundai Electronics and LG separately before merging them in October. But Kim said the company would try to merge the R&D and marketing divisions beforehand. Kim said Hyundai planned to separate the production lines for DRAM chips of less than 128 megabit, as the two companies had different processes and designs in wafer fabrication. But Hyundai would form a single line to produce chips above 256 megabit DRAM. Chief financial officer Chang said the company planned to expand only after the second half of 2001, when it would focus on upgrading its production. He also said Hyundai could not keep two chip plants in Britain -- Hyundai's factory in Scotland and one in Wales by LG. Both companies had plans to invest about $290 million each in the two overseas plants before the merger. Hyundai also has a plant in the United States. ''There will be time for us to make a decision (to choose one),'' Chang said. Hyundai was prepared to shoulder any burdens resulting from closures, because both companies had been given incentives by the local governments to build the plants, Chang said without giving further details. After setting up a single chipmaking company, Hyundai Electronics would spin off its industrial electronics divisions, probably from the first quarter of next year. ''We want to make them viable before we sell them possibly to foreign companies,'' Chang said. ($1 - 1,186 won) dailynews.yahoo.com