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To: DJBEINO who wrote (9127)	1/19/2001 7:37:22 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

Asia DRAM Report: PC Downturn Spurs Deep Capex Cuts By Kirby Chien Of DOW JONES NEWSWIRES TAIPEI (Dow Jones)--The unexpectedly sharp downturn in global demand for personal computers is spurring semiconductor makers to slash capital spending on production of dynamic random access memory chips and speed up diversification of their product lines. "Chip makers in general will cut capex outlays by 10%-15% this year while DRAM makers will curtail capital spending by 30%-40%," said Chong Hwa Jon, a chip analyst at Salomon Smith Barney KEB Securities in Seoul. Just this week, Hyundai Electronics Industries Co. (Q.HEL) - the world's third-largest DRAM maker - announced a massive cut in capital spending, to US$525 million this year from the originally planned US$1.2 billion. "The others will have to follow," said Jonathan Dutton, the head of Korean technology at USB Warburg in Seoul. Computers account for around 60% of the demand for DRAMs. A string of recent warnings from major computer makers that demand for their products is slackening has pushed spot prices for commodity-like DRAMs steadily lower in recent weeks. Benchmark 64-megabit DRAMs are now selling for US$3.20, a sliver above the industry's US$3.00 production cost, and down from the almost US$9.00 last summer. Although an expected round of interest rate cuts in the U.S. could help jump start demand for personal computers, analysts say a recovery in DRAM prices is still a ways off. Capital expenditures in the U.S. this year could slump to only 33% of the average level over the previous two years, warns Graham Courtney, an UBS Warburg regional economist in Tokyo. Such a sharp cutback would extend the slack demand for computers and other electronic products, making it difficult for DRAM makers to justify any new investments. The U.S. consumes some 38% of the world's total production of DRAMs and is a crucial factor in any industry turnaround. Prices For Specialty Chips Remain Strong Still, despite the overall sluggishness in the DRAM market, prices for some specialty chips remain strong. A 64MB extended data output DRAM chip, for instance, now sells for around US$11 even though its production cost is about the same as regular DRAMs. The EDO chip is used primarily in business-oriented servers, a market segment that has so far been somewhat insulated from the slowing retail demand for PCs. That's encouraging some chip makers to spend a larger share of their slimmer investment budget on production of these higher-margin specialty chips. For example, Taiwan's Powerchip Semiconductor Corp. plans to lower its reliance on DRAM to 50% of sales this year from the over 80% last year, said Alfred Wang, a manager at the Electronic Research and Service Organization, a nonprofit organization affiliated with the Taiwanese government. Powerchip is looking to increase production of embedded memory chips and static random access memory this year to reach that goal. Already, Samsung Electronics Co. (Q.SSE), the world's largest DRAM maker in terms of sales, gets 19% of revenue from EDO DRAMs. Over the past five years, Samsung has lowered its reliance on DRAM chips from 90% of total memory product revenues to around 70% last year, said ERSO's Wang