Re: Symbios Logic / Adaptec / Korea chip dumping
02-21-98 Crisis Forces Hyundai to Sell Off U.S. Subsidiary; Samsung Seeks Capital Injection from Intel
By Yu Kun-ha Staff reporter
Korean chip makers are moving swiftly to extricate themselves from a staggering financial crisis.
Hyundai Electronics Industries (HEI) yesterday said it has agreed to sell Symbios Logig Corp., a profit-making subsidiary in the United States, to Adaptec Inc. of California for $775 million.
Hyundai's move followed Samsung Electronics' announcement that it is seeking an alliance with chip giant Intel Corp. for an injection of badly needed capital.
''Adaptec has agreed to take over Symbios for $775 million, including liabilities,'' said Hyundai president Kim Young-hwan.
The deal must have been painful to Hyundai because Symbios is a profitable company. Last year, the Fort Collins, Colorado-based nonmemory chip producer posted a net profit of $69 million on an annual revenue of $620. Symbios produces nonmemory chips and storage systems for personal computers, workstations and telecom equipment.
But the decision was inevitable for Hyundai which has been experiencing a serious cash shortage. According to a report by ING Barings Securities, Hyundai had run up an over one trillion won negative cash flow at the end of last year, with its loss for the year estimated to total 44.6 billion won. The financial crunch had forced the company to suspend construction of a chip plant in Scotland.
''The proceeds from the sale of Symbios will be used partly for the construction of a chip plant in Eugene, Ore., partly to bolster the nonmemory operations in Korea, and partly in operation funds of Hyundai Electronics America (HEA),'' Kim said.
He noted that the sell-off of Symbios does not mean Hyundai's pullback from the nonmemory business. ''We will extend the life of memory lines in the Ichon plant near Seoul to turn out memory chips merged with logic chips,'' Kim said.
He also added that the improved cash flow of HEA will facilitate chip shipments from Korea.
Hyundai purchased Symbios from AT&T in 1995 for $340 million. During 1996 and 1997, the company had chalked up some $100 million in aggregate profit.
Adaptec Inc., based in Milpitas, Calif., is a supplier of components for linking high-speed devices in computers and peripherals. Last year it reported revenues of $933.9 million.
Meanwhile, Samsung Electronics, the world's largest memory suppliers, said it is talking with Intel Corp. about a capital injection.
Intel already has a 10 percent stake in Samsung Austin (Texas) Semiconductor, Samsung's American subsidiary.
Like Hyundai, Samsung has been experiencing financial trouble since the start of the currency turmoil late last year. The ING Barings Securities report estimated Samsung had run up a negative cash flow of 3.28 trillion won at the end of last year. The company's net profit plunged from the 164 billion in 1996 to a minuscule 6.3 billion won last year, down 96 percent.
According to a Samsung spokesman, if Intel agrees on a capital infusion, it will get in return a stable supply of chips from Samsung. Declining to elaborate, he said the talks are just in the initial stages and will take much time before reaching an agreement.
The swift moves by Hyundai and Samsung to raise new funds, according to industry watchers, are partly prompted by the need to upgrade their 64-megabit DRAM (dynamic random access memory) lines to a ''fourth-generation'' capability, which will enable them to double to 400 the number of 64-Mbit dice they can build on a single 8-inch wafer.
''This transition to a fourth-generation production capability is necessary for the chip makers to generate some profits in the 64-Mbit DRAM business,'' an industry expert said.
''With just 200 die from a wafer, you can't make any money.''
The upgrading of production lines, he
(Continued on Page 2) pointed out, assumed an added importance following the recent leak of third-generation technology to a Taiwanese chip manufacuturer.
The three Korean chip makers, including LG Semicon, are expected to sharply increase their 64-Mbit output soon.
Meanwhile, American and Japanese suppliers of chip-making equipment and materials are moving to help their Korean customers to tide over their financial troubles.
According to industry sources, 16 American equipment vendors are talking with major U.S. financial institutions to enable Korean chip makers to continue investment in production facilities.
This year, the capital investment by the Korean chip trio is expected to drop by 50 percent to $2 billion, dealing a harsh blow to American and Japanese equipment and materials vendors.
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03-05-98 Korean Chip Makers Dismiss U.S. Suspicion of Expansion in Facilities Investment in 1998
By Yu Kun-ha Staff reporter
How much will Korean chip manufacturers be able to invest in production facilities this year?
Years of recession in the global memory market and the ongoing financial crunch are forcing the Korean chip trio to scale down their investment plans.
But are they really cutting investment in production facilities?
Company officials say they are, but the American chip industry and media seem unconvinced. For instance, Steve Appleton, chairman of Micron Technol-ogy, a memory manufacturer in Boise, Idaho, asserted in a recent congressional hearing that Korean chip makers are sticking by their original investment plans.
The Micron chairman has been spearheading a vigorous lobbying campaign to move the U.S. government, Congress and mass media to take steps against the Korean chip industry.
More recently, an American chip industry journal reported that Korean chip companies are forging ahead with their expansion projects, despite the Asian financial crisis and challenges by the American Semiconductor Industry Association (SIA).
The report was prompted by Samsung's plan to purchase new lithography devices from Dutch-based ASM Lithography. Samsung has placed an order for the equipment to upgrade production lines for 64-megabit DRAMs.
According to Samsung officials, the equipment costs several million dollars, not hundreds of millions of dollars as reported. They said that Samsung's investment budget for this year has been set at $1 billion, half of last year's $2 billion.
Samsung's capital spending, they said, will not decrease much over last year, when measured in terms of the Korean won. But given that a large proportion of investment is made to purchase foreign production equipment, which has to be paid for in dollars, the company's actual investment capability sharply dwindles.
According to the American media report, Hyundai Electronics Industries and LG Semicon also have not backed off ambitious chip plans, despite financial pressure and the U.S. jawboning.
But Hyundai, which has sold off its U.S.-based subsidiary, Symbios Logic, to Adaptec for $775 million, announced earlier this year a much contracted investment plan.
According to the plan, Hyundai's total investment budget for this year is one trillion won, a 40 percent cut from last year's 1.6 trillion won. In dollar terms, the cut is much deeper. Some industry watchers doubt the company can meet this year's investment goal.
Not all of this money will go into its chip operation. The company has earmarked some 700 billion won for facility expansion for 64-megabit chips and development of static RAM and flash memory chips.
The rest of the money will be channeled into the company's telecom business, especially the development and production of new cellular handsets. Hyundai has recently begun a determined push for this high-growth telecom sector.
What about LG Semicon? The company was reportedly seeking to surpass Micron Technology to become the largest global producer of 16-megabit DRAMs this year by shipping 315 million units compared with Micron's 300 million.
An LG Semicon spokesman said the company has been cutting down on its 16-megabit output, although to a lesser degree than Samsung Electronics. LG, he said, may presently have the world's largest production capacity for 16-megabit devices but this does not necessarily mean it will emerge as the largest supplier.
LG Semicon has not yet disclosed its investment plan for this year. According to the spokesman, the company has been carefully following recent developments in the global memory industry. But he expected LG's investment to go down from last year's two trillion won to below one trillion won this year.
''It is nonsense to expect Korean firms to stick to their original investment plans drawn up last year. Under the current situation, they cannot help scaling down,'' the official said.
According to an official of the Korea Semiconductor Industry Association, it is difficult to estimate how much the Korean chip trio will actually invest this year because the global memory industry is going through transition.
He said the same is true of Taiwanese and Japanese chip producers. For instance, he said, market research firms present widely different projections on the investment amount of Taiwanese firms.
''As the situation is highly fluid, most players will closely watch the moves of their competitors in determining the proper level of investment,'' the official said, adding, however, that the Korean chip trio do not have the resources to maintain last year's level of capital spending.
In their desperate bid to fund facility upgrading, the Korean companies have asked foreign chip-making equipment and materials vendors to help them get loans from foreign financial institutions.
Responding to this call for help, Semiconductor Equipment and Materials International (SEMI) is moving to provide support to the besieged Korean chip industry.
SEMI's American member firms are countering the anti-Korean campaign of Micron Technology with the Semiconductor Industry Association standing behind it.
According to industry watchers, the two organizations also squared off against each other in 1993 when Micron Technology filed a dumping suit against Korean chip producers.
Then, the Korean firms emerged almost unscathed from the suit, thanks largely to the support of American computer vendors who rely on chip shipments from Korea.
American computer vendors, according to industry watchers, have so far been silent but are expected to side with Korean chip suppliers as they still rely heavily on Korean memory chips. |
