Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Thomas G. Busillo who wrote (26752)	1/17/1998 10:15:00 AM
From: Mark Taylor	Read Replies (3) \| Respond to of 53903

Micron Could Get Boost From Asian Crisis sltrib.com BY ANTHONY EFFINGER BLOOMBERG NEWS BOISE -- Nobody is cheaper than Micron Technology Inc. at making dynamic random access memory chips, or DRAMs, used in personal computers and consumer electronics. That's a blessing. Prices for 16-megabit DRAM recently plunged to less than $3 each, down from $8 a year ago as South Korean companies such as Samsung Electronics and LG Semiconductor Co. opened new chip plants and flooded the market. Now, some Micron investors think chip prices -- and Micron's stock -- are about to rise. Korea's chip makers are reeling from a financial crisis that has left them short of cash and unable to complete some of the chip plants they have planned. ''One fine day, the Koreans won't be able to make huge investments to recklessly chase'' the DRAM market, said Jim Glickenhaus, a partner at Glickenhaus & Co. in New York, which owned 2.38 million Micron shares as of September. Glickenhaus and other investors are betting Micron is in a better position than its rivals when chip prices rise. In fact, Micron stock already is on the move, and recently traded at about 31, up from a low of 22 in mid-December. But that is still far below the 52-week high in early August of 60 1/16. Already, Korean companies are either thinking about or putting planned chip plants on hold. Last month, Dongbu Group said that it may delay a $1.7 billion DRAM plant that it planned to build with International Business Machines Corp. Samsung, the world's biggest DRAM maker, has delayed a $500 million expansion of its DRAM wafer plant in Austin, Texas. Samsung, LG Semiconductor and Hyundai Electronics Industries Co. are expected to invest only $3.3 billion in new plants in 1998, down 40 percent from last year, according to Dataquest Inc. And Micron itself has kept construction on hold. Completion of a half-built $2.5 billion fabrication plant planned for Lehi, Utah, has been on hold for nearly two years. The company will complete a chip testing facility at the site this year, but has announced no intention to proceed with larger-scale construction. Korean companies also may find it hard to justify keeping existing plants operating largely because of the big drop in the Korean currency, the won, down 45 percent against the dollar in the past three months. That raises prices Korean companies must pay for imported supplies such as silicon wafers and chip-making equipment. Hyundai Electronics, Korea's No. 3 chip maker, spends about $1 billion a year on raw materials, most of it imported. Hyundai also had $2.9 billion of debt denominated in foreign currencies at the end of June. That debt becomes more expensive to pay off every time the Korean won falls. Unfortunately for Micron, Korea's woes also mean that things could get worse before they get better. Analysts said Korean chip companies are selling inventory at almost any price to get the U.S. dollars they need. ''The Korean companies are exporting everything they can,'' said Fred Zieber, president of Pathfinder Research, a San Jose, Calif., market research firm. Prices Rebound: Even so, people who trade chips say 16-meg DRAM prices have rebounded slightly. After dropping to as low as $2.25 apiece, some shipments are selling for $3.40 or more. That still is a tough price even for Micron, which managed to earn a penny a share in the most recent quarter. Analysts estimate Micron's production costs at about $3 per 16-megabit chip, compared with $4 to $4.50 for the Korean manufacturers. Micron Chief Executive Officer Steve Appleton blames the Koreans for the glut in the memory-chip market, and he is incensed the United States is helping with a multibillion-dollar bailout of the country. He is lobbying Congress to make sure none of that money goes to build DRAM plants that the world does not need. ''Their companies mismanaged the business and now we're going to save them,'' Appleton said in an interview. ''Our tax dollars are being spent to put us out of a job.'' Playing With Pain: Investors who own Micron stock are counting on Appleton to win his fight with the Koreans. The 37-year-old former college tennis star does not give up. After breaking his right thumb, he learned to play left-handed. Appleton says any increase in chip prices will drop almost straight to the Boise-based company's bottom line because costs are so tightly controlled. If prices rise by 25 cents for each of the estimated 84 million DRAM chips that Micron produces each quarter, the company takes in another $12 million in sales. Because the market for chips is highly volatile, a price rise could start any day, analysts say. And demand is not a problem because more and more of the chips are making their way into computers, automobiles and appliances. ''There is more computing power in your car these days than there was in Apollo rockets,'' said Micron investor Glickenhaus, who bought more Micron stock in recent weeks. Micron fans also have history on their side. A combination of strong demand and a chip shortage sent DRAM prices skyward earlier in the decade, boosting Micron's stock almost fivefold to a record high of 94 3/8 in September 1995. With digital video disk players and a host of memory-hungry Internet appliances coming out, DRAM could have its day again. Micron investors can only hope that Appleton persuades policy-makers in Washington and financiers in New York not to give Korea and its chip makers too much help.