U.S. chip and chip equipment firms seeking to help Koreans
SAN FRANCISCO, Feb. 22 - Some U.S. semiconductor and semiconductor
equipment companies are looking at ways to bail out Korean chip
makers, which may risk missing an entire technology cycle because
of Korea's economic crisis.
The three Korean semiconductor giants, Samsung Electronics Co.
Ltd., Hyundai Corp. and LG Electronics Inc. produce 35 percent of
the world's memory chips and bought about $5 billion of chip-making
equipment in 1997.
Cash-strapped Korean conglomerates have been putting some of their
spending plans on hold and have delayed many big chip fabrication
plants, which cost more than $1 billion to build and equip with the
latest manufacturing machinery.
According to Strategic Marketing Associates, a market research firm
in Santa Cruz, Calif., Korean companies canceled or delayed $7.7
billion in "fab" spending in 1997.
"Most of the technology they have today was ordered in '93, '94 and
'92 even," said Dan Hutcheson, president of VLSI Research, which
tracks semiconductor equipment makers. "It's pretty obsolete, they
have very little cutting-edge capacity."
On Thursday, a Samsung Group spokesman confirmed the company was
talking to Intel Corp. about a possible equity stake in its
semiconductor business, Samsung Electronics, in the form of a
sizeable cash investment. The Financial Times reported that the
stake could be as big as to $1 billion.
Executives at Santa Clara., Calif.-based Intel, the world's largest
chip maker, declined to comment. Last year, Intel purchased a 10
percent stake in Samsung's Austin, Texas, plant, seeking to ensure
a stable supply of memory chips for personal computers.
Intel makes microprocessors, the brains for PCs, and would be hurt
by a memory chip shortage that could drive the price of memory chips
and PCs higher.
At the same time, the U.S. semiconductor equipment industry is
looking at ways to help finance the purchases of their equipment by
their Korean customers.
The industry trade group, the Semiconductor Equipment and Materials
International (SEMI) association, has formed a working group to help
its member companies worldwide explore ways to help finance their
Korean customers.
The group has had investment banks, such as ABN Amro, and leasing
companies like GE Capital, talk to top executives of chip equipment
companies such as Novellus Systems Inc., Lam Research Inc., and
KLA Tencor Inc., about different financing instruments or leasing
possibilities.
"We are looking at any activities that will revitalize the Asian
economies, particularly Korea," said SEMI President Stan Myers.
"The long term here is much more important than the wiggles and the
waggles of the markets."
The Korean chip giants are suffering from a currency crisis that
inhibits their ability to make capital expenditures, because they
cannot get letters of credit or hard currency to buy imported
semiconductor equipment.
Ironically, the business that could seriously suffer from a lack
of capital investment - the volatile memory chip business - also
is seen as a cause of Korea's woes.
"I believe the DRAM (dynamic random access memory chip) is the
largest single export from Korea," said Robert Hartinger, a senior
vice president at ABN Amro.
"The fact that its price dropped by 70-plus percent in 1996 had a
real impact on the balance of trade," Hartinger said. "The
oversupply of DRAMs, the rapid increase in production, has had a
big impact on Korea ... on the balance of trade and on its abilty
to service its debt."
Hartinger presented six financing options for U.S. equipment
companies to consider, including short-term and medium-term
financing.
"We have a significant number of bids out there," Hartinger said,
adding he was working with several companies, whom he declined to
name. "Now it's pretty much in the Koreans' court, on what they want
to do, on what kind of terms they want to accept to finance their
equipment."
On Thursday Hyundai's U.S. subsidiary, Hyundai Electronics America,
sold its U.S. component company, Symbios Inc., to Adaptec Inc., for
$775 million, mostly in cash, a deal that Adaptec said was
precipitated by the Asian economic crises.
Some in the industry expect more deals such as Adaptec's and
possibly a purchase by Intel of a stake in Samsung.
"We have been active in trying to find alternative forms of
financing," said Richard Hill, chief executive of Novellus Systems
in San Jose, Calif. "There are some positive signs right now ...
that they are helping themselves." Hill noted that the Korean
companies' financial problems were liquidity issues and that they
still remain technology leaders.
"This is just a short setback," Hill said. "They will find the cash.
I'm sure there are things each of us will do. It will be a
combination of things. They are very resourceful."
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