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Technology Stocks : Motorola (MOT) -- Ignore unavailable to you. Want to Upgrade?

To: Jack Hartmann who wrote (1767)	4/26/2000 9:22:00 PM
From: Jack Hartmann	Respond to of 3436

Ramifications of Hyundai selling its fab to Motorola Steve Cullen, Cahners In-Stat Group Apr 26, 2000 --- Despite the recent dip in pricing, the DRAM market is in recovery. By the end of the year, Cahners In-Stat Group expects to see higher pricing as demand overtakes capacity. The good times for the DRAM industry should extend into 2001 and 2002, perhaps even longer. So shouldn?t DRAM makers be thinking about building new fabs? In previous cycles they would be, but this time around, not only are DRAM capacity additions at a minimum, but some suppliers are still retrenching. Hyundai, number two in the DRAM market in 1999, provides us with a case in point. When the Asian liquidity crisis hit in 1997, Hyundai found itself with a fab shell in Dunfermline, in the Fife region of Scotland, and LG Semicon found itself with a similar facility in Newport Wales. Both of these shells had been completed after the 1996 DRAM price-crash in anticipation of the next upturn. Today, they both belong to Hyundai because of its 1999 acquisition of LG Semicon. Either of them could have been fitted-up over the next year or two as a leading-edge DRAM fab as originally intended. But Hyundai has prioritized working-down debt and making better use of existing fabs over adding new capacity. The announcement last week that Motorola will buy Hyundai?s one-million square-foot shell in Dunfermline, takes one of these potential new DRAM fabs out of play. The former LG shell in Wales could also be sold if the right buyer comes along. The proceeds from the Dunfermline shell sale, which have been reported to be in the $150 million range, will allow Hyundai to upgrade existing fabs in Korea. This will provide some capacity increases, but not nearly as much as a new fab. Micron has said that its shell facility in Lehi, Utah will be initially equipped for assembly and test operations. Fab facilitation for Lehi is not yet in the capital spending plan, as Micron focuses on continued upgrades to the fabs it bought in 1998 from TI. Samsung is adding new capacity, but at a relatively restrained pace. With Samsung, Hyundai, and Micron controlling about 60% of the DRAM market, each of them can defer new fab construction and fit-up at relatively low-risk to their market-shares by simply watching the other two carefully. Maybe the DRAM industry really will behave more rationally in this market recovery than it has in the past. If so, it could result in a longer and stronger upturn period than we have seen in previous cycles. As for the Dunfermilne facility, Motorola, plans to bring it on-line in 2001 at 0.15 micron. It will use the capacity to help satisfy the rapidly growing demand for mobile communications chips, many of which will undoubtedly be used at its large wireless-products plant at nearby Bathgate, Scotland. This will be Motorola?s third and largest wafer fab in Scotland. The first was an expansion of an assembly-and-test facility established at East Kilbride in 1969, and the second, at South Queensferry, was bought from Digital Equipment Corp several years ago. The third winner in the transaction is Scotland itself, which solidifies its position as a leading European location for semiconductor manufacturing and design with six fabs and over 100 related firms. By 2005, Motorola expects to invest about $2 billion in the Dunfermline fab, and add 1,350 to its current 6,500 person Scottish workforce. ************* Sounds like Hyundai was needing some cash. Jack