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To: Berk who wrote (21985)	7/20/1998 6:36:00 PM
From: Teri Skogerboe	Read Replies (2) \| Respond to of 70976

Siemens Doesn't Rule Out Closure of Chip Factories Frankfurt, July 20 (Bloomberg) -- Siemens AG, Germany's largest electronics and engineering company, said it doesn't rule out the closure of semiconductor plants as it looks at ways to cut production capacity to counter price declines. Siemens said at a news conference Thursday that its semiconductor unit will post a loss of 1 billion deutsche marks ($562 million) in the fiscal year ending Sept. 30. The unit contributed 5 percent of fiscal 1997 pretax profit, down from 18 percent in the previous year. ''We are considering our options, and nothing has been decided,'' said Siemens spokeswoman Katja Schlendorf. ''If the price decline continues, then we could consider whether to shut production facilities.'' Like its rivals, Siemens, Europe's third-largest chip maker after the Netherland's Philips Electronics and France's SGS- Thomson Microelectronics NV, has had to cut prices amid a worldwide surplus of chips and cheaper imports from South East Asia. ''The semiconductor industry is prone to vast, sickening price swings,'' said Adrian Hopkinson, an analyst at WestLB in Dusseldorf. ''It's something it has to live with.'' The spot price, or price for immediate delivery, of the 16- megabit dynamic random-access memory chip most commonly used in personal computers, has fallen to less than $1.50 from around $9 in January 1997. Memory chips account for about one third of Siemens' chip business. Producers have been hit by the Asian financial crisis, which has dampened demand and increased competition. At the same time the switch to a new generation of 64-megabit chips has cut demand for 16-megabit chips. Korean Shut-Downs The extent of the problems facing the industry is highlighted by events in South Korea where two of the world's top 10 chip makers have temporarily shut their plants as they try to cut supply and boost profits. Samsung Electronics Co., the world's largest memory chip maker, has halted production at its Korean plants for one week until July 25 and sent employees on holiday as part of an effort to shore up chip prices. Hyundai electronics Industrial Co., another major chip manufacturer, will keep its plants idle for the seven days ending July 23. It is the first time Korean semiconductor companies have stopped production for a week in consecutive months. They hope the closures will improve the profitability of their mainstay memory chips, which are often being sold at less than their production costs. Siemens said Thursday it's looking to cut production capacity in memory chips as it focuses more on ''logic'' chips used in mobile phones and other consumer electronics. It hopes this will reduce its exposure to price fluctuations in memory chips. Six Plants Siemens' Schlendorf rejected a report in weekly newsmagazine Der Spiegel that said Siemens wants to almost completely pull out of producing cheap memory chips in the coming months, putting at risk over 1,000 jobs at five factories. ''We will not pull out of memory chip production,'' she said. The company produces semiconductors at six plants worldwide. Its German factories are in Regensburg and Dresden, though the latter wouldn't be affected by any measures to cut capacity, Schlendorf said. In Paris, the company operates a factory with International Business Machines Corp., and in Richmond, Virginia, it runs a plant jointly with Motorola Inc. Siemens also has factories near Newcastle in the U.K. and in Taiwan. Der Spiegel reported that Siemens wants to sell its stakes in the factories it jointly runs with other partners, such as the ones in France and Taiwan. Should the partners not want to buy Siemens out, the plants would be shut down, the magazine said. 07:36:35 07/20/1998 Any redistribution of Bloomberg content, including by framing or similiar means, is expressly prohibited without the prior written consent of Bloomberg L.P. Any reference to the material must be properly attributed to Bloomberg News.