MICRON TECHNOLOGY OPPOSES U.S. ROLE IN SOUTH KOREAN BAILOUT
By Dean Takahashi
Staff Reporter of The Wall Street Journal
Micron Technology Inc., one of the last U.S. manufacturers of memory chips, is going on the offensive against a bailout of South Korea by the International Monetary Fund.
The Boise, Idaho, semiconductor maker is lobbying U.S. government officials and members of Congress to voice concerns that taxpayer dollars could help South Korean chip makers that Micron has accused of unfair competition.
Steve Appleton, Micron's chief executive officer, argues that any U.S. money that goes to the South Korean companies would effectively reward them for producing too many chips and helping to trigger a price plunge that has hurt Micron and other memory-chip makers.
"The thought that our tax dollars will go to subsidize competitors and take away our jobs is troublesome," Mr. Appleton said. "This keeps me up at night. We are asking to have responsible thought go into where this money goes."
Mr. Appleton has expressed his concern to U.S. officials who are negotiating terms of U.S. participation in the proposed IMF bailout for South Korea. On Micron's behalf, Sens. Dirk Kempthorne (R., Idaho) and Orrin Hatch (R., Utah) have written letters to Treasury Secretary Robert Rubin. Sen. Larry Craig (R., Idaho) has also voiced concerns to the Clinton administration.
"We want to stipulate in the agreement that the money should not support practices that hurt U.S. producers," said Michael Frandsen, a spokesman for Sen. Craig.
Micron has been prominent in pushing allegations against foreign competitors, first in Japan and then South Korea, of violating so-called antidumping laws by selling chips below manufacturing cost. Micron has a pending complaint against the Korean companies that is being reviewed by the Commerce Department, but so far no extra duties have been assessed to the Korean manufacturers.
Mr. Appleton said Micron stands to suffer if the Korean chip makers are propped up by bailout funds, particularly since the market for the most popular memory chips, dynamic random access memory, or DRAM, is currently in its worst downturn in history.
DRAMs, which are used to store memory in personal computers, have plunged in price due to overcapacity in the past couple of years. Micron's staple 16-megabit DRAM chips are selling at around $3.50 each, compared with about $60 each two years ago. That price is at or below the manufacturing costs of all but the most efficient manufacturers in the industry, Mr. Appleton alleges.
U.S. subsidiaries of Korean manufacturers Samsung Electronics, LG Semicon and Hyundai Electronics didn't return calls seeking comment. They have denied dumping charges in the past.
Treasury Department officials said the amount of the bailout hasn't been set and specifics of the U.S. contribution haven't been worked out. It also is unclear how much money Korean chip manufacturers might receive, if any, from the bailout plan. Similar concerns have been voiced by U.S. auto makers about aid to Korean auto makers, who are also accused of dumping.
Chalmers Johnson, president of Japan Policy Research Institute, a think tank based in La Jolla, Calif., said he sympathized with Micron but still expects the bailout to proceed because of the "larger goal" of propping up a crucial leg of the world economy. "I don't think it is going to do any good to exclude any one industry from the bailout," he said.
But Clark Fuhs, analyst at market researcher Dataquest Inc. in San Jose, Calif., believes the IMF will likely place restrictions on the use of bailout capital in Korea's chip, steel and auto industries. He thinks the Korean chip makers will cut capital spending by 20% to 40% in 1998, may shift some of the manufacturing capacity to non-DRAM products and possibly cut prices even further due to the devaluation of the Korean won against the dollar. The price cuts will likely continue because the devaluation lowers that country's relative operating costs.
LG and Hyundai have recently said they are scaling back investments in future plants, but Samsung is about to open a new factory in Fort Worth, Texas.
So far, Micron hasn't received much support from other U.S. chip makers. The Semiconductor Industry Association said it supports the bailout because it believes it is necessary to prop up the global economy and demand for chips.
Dan Hutcheson, president of VLSI Research Inc., a market researcher in San Jose, Calif., estimates the Korean chip makers will lose a combined $2.7 billion in the semiconductor business this year.
Mr. Hutcheson said he believes much of the South Korean government's aid to the country's chip makers has been indirect, such as guarantees on loans from private banks to chip makers.
"It's been a closely guarded secret as to how much government money goes to the chip makers," he said.
Copyright (c) 1997 Dow Jones & Company, Inc.
December 02, 1997 1:14 AM
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