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To: Ausdauer who wrote (14520)	9/6/2000 7:03:10 AM
From: puborectalis	Read Replies (1) \| Respond to of 60323

Samsung Sees Chip Shortages Until 2002, Adds Capacity (Update2) By Ian King Seoul, Sept. 6 (Bloomberg) -- Samsung Electronics Co. said shortages in the $30-billion-a-year memory chip market may last another two years, refuting concern about oversupply that helped shares in the world's largest maker of such chips lose a fifth of their value in two weeks. Rising demand for dynamic random access memory chips used in the latest digital versions of cameras, televisions and video disc players will outweigh slowing U.S. demand for computers, Lee Yoon Woo, President of Samsung's semiconductor division said. ``The mercurial growth of the Internet market and digital media products will lead to a shortage of DRAMs until the year 2002,'' Lee said at a press conference. Samsung's forecast comes after its shares dropped 33 percent from a July 13 high of 394,000 won, including an 18 percent drop the past two weeks on investors' concern a quicker-than-expected rise in chip prices earlier this year would lead manufacturers to boost production and cause oversupply. Samsung will invest a total of 5.7 trillion won ($5.2 billion) in the business in the year. Starting next year it will invest $3.5 billion in new facilities up until 2003. The company forecasts chip-related sales for this year will reach $13 billion and $30 billion by 2005. ``Recent news about Samsung Electronics' production increase could add to concerns among investors that chip demand may not reach expectations next year as world's economy is slowing down,'' said Jeon Jino, a strategist at Hyundai Securities Co. in Seoul. Yesterday, Intel Corp, the world's largest semiconductor maker fell 6.3 percent after an analyst said personal computer demand has slowed, and the recovery that usually comes with the back-to-school season hasn't materialized yet. Prudent Some analysts said Samsung Electronics, which had a 21 percent market share in memory chips at the end of last year, is being prudent in its forecasts for demand for its key product. ``Normally you would expect to see DRAM-making equipment accounting for 40 percent of the whole of the semiconductor equipment market in an upswing period and at the moment it's about 25 percent,'' said Keon Han, an analyst at Bear Sterns in Hong Kong. ``The market sentiment on (Samsung) is based on wrong information or not understanding the right information.'' To meet expected memory chip shortages, Samsung will start production at its 10th plant south of Seoul and begin building the 11th later this month. Line 11, using 12-inch silicon wafer equipment, is slated to begin production in the second half of 2001. Nearly all chipmakers today use 8-inch wafers. Profits Larger wafers mean companies can get more chips from a piece of silicon, which should lead to increased capacity. Still, ``the shift to 12 inch (300 mm) won't affect the commodity market for lower-end chips as the new production lines will be used for higher-value chips,'' Hwang Chang Gyu, Samsung's vice president in charge of its memory division, said at the same press conference. Investors watch the spot market price of the 64 megabit 8X8 PC100 DRAM, which has fallen 7 percent since it peaked at $8.96 on July 31. Still, when supply is limited, as little as 5 percent of the chips are sold on that market, limiting its use as an indicator of demand. ``One percent fluctuations in the spot price don't make any difference to the profitability of these companies,'' said Bear Stern's Han. Samsung Electronics shares finished unchanged at 257,500 won after rising as much as 2.5 percent. Non-Memory Plant Samsung said it will build a system chip factory with 8-inch silicon wafer lines for custom-designed computer chips. The plant will produce application specific integrated circuits (ASIC), processors and system on chip modules beginning ``early 2002.'' The market for custom-designed chips is currently dominated by Taiwanese manufacturers such as Taiwan Semiconductor Manufacturing Co. Samsung is hoping to expand into this business to offset the risks of price fluctuations in the memory market and to convert some of its older DRAM facilities to made-to-order chips. The company predicts sales from its custom chip division will reach $5 billion in that period.