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To: Norrin Radd who wrote (3981)	9/18/1998 10:08:00 AM
From: DJBEINO	Respond to of 9582

FOCUS-Taiwan chipmaker (UMC)halts T$500 bln plan By Alice Hung TAIPEI, Sept 17 (Reuters) - United Microelectronics Corp (TW:2303), Taiwan's second largest microchip maker, said on Thursday it had decided to halt a massive T$500 billion ($14.5 billion) investment plan due to oversupply in the industry. "We have decided to put the T$500 billion Tainan project on hold for the time being," John Hsuan, co-chief executive officer of United Micro group, said at a news conference. In June 1997, United Micro said it would invest T$500 billion over the next 10 years to build several 12-inch wafer fabrication plants at the Tainan science-based industrial park in southern Taiwan. It would have been the island's single biggest industrial project. But United Micro said on Thursday that current industry conditions did not justify such an ambitious plan. "The whole semiconductor industry is under very serious oversupply pressure," Hsuan said. "I see no reason to justify why people should invest in 12-inch fabs now." Analysts were not surprised. "The company is making a right decision. It would be extremely unrealistic for the company to continue its planned investment plan," said Oliver Fang, National Securities' institutional sales chief. "The timing is simply not right." Nomura Securities' research head Jeffrey Liang also praised the move. "Since over-capacity is still a major concern in the industry, it makes sense to keep the cash." United Micro is one of the world's leading makers of made-to-order semiconductors, a specialist industrial sector known as "foundry chipmaking." In Taiwan, it is second in production value only to microchip powerhouse Taiwan Semiconductor Manufacturing Co (TW:2330). United Micro's U.S. division president, James Kupec, said it would take at least a year for the industry to recover. "In about a year or a year and a half from now, the oversupply situation will change," he told the news conference. But before that, Kupec said he expected to see 10 percent price erosion in the first half of 1999. In 1997, upbeat Taiwan's microchip makers shook up the industry by announcing plans to invest over US$80 billion to build more than 30 advanced wafer fabrication plants in the next 10 years. In addition to United Micro's giant project, Taiwan Semicon said it would build six advanced wafer-fabrication plants as part of a 10-year, T$400 billion investment in Tainan. Several chipmakers followed suit, announcing similar projects with investment ranging between T$100 billion and T$200 billion. As the regional financial crisis started to unfold, many Taiwan chipmakers were forced to slow down or suspend originally planned investments. Taiwan Semicon lowered its 1998 capital spending plan to US$920 million from US$1.3 billion in late June. Hsuan said United Micro remained committed to investing in the industry, but he said not every company would be able to fulfil pledged investments. "I would predict about 50 percent of the programmes will be stopped. This is not a problem just for Taiwan, it's a problem for the global semiconductor industry," Hsuan said. Nonetheless, Hsuan said United Micro was in talks to acquire an eight-inch wafer fabrication plant in Europe, Japan or the United States. "We feel buying existing capacity is cheaper than building a new one now," he said. Hsuan said the deal would be finalised before the end of September. Hammered by a sluggish semiconductor industry worldwide, prices of Taiwan's semiconductor shares have slumped. United Micro shares stood at T$34.10 on Thursday compared with a 1998 high of T$73.64, although the stock closed 30 cents higher on the day. In August, United Micro slashed its 1998 pre-tax profit forecast to by 49 percent to T$5.442 billion and its sales forecast by 39 percent to T$18.347 billion. (US$1=T$34.5)

To: Norrin Radd who wrote (3981)	9/18/1998 10:33:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

US Watches Use of IMF Funds 09/18 17:41 The U.S. administration has been monitoring whether rescue loans provided by the International Monetary Fund are being used to subsidize Korea's ailing key industries, a U.S.-based lawyer stated in a newspaper article yesterday. Kim Sok-han, a lawyer of Korean descent, said in his article published in Dong-A Ilbo that the U.S. government has been operating a special task force since July to see if Korea is adhering to the bailout terms associated with the IMF's $58-billion rescue package. The task force, comprised of officials from the Trade Representative Office and the Departments of Treasury, Commerce and State, has an incentive to make such a probe since Korean companies are in competition with American enterprises. Kim insisted that the task force was established under pressure from the U.S. Congress and from American firms competing with Korean enterprises.''At present, the task force is confining its function to monitoring Korea's semiconductor makers, but the probe could spread to the auto and steel industries,'' he said. With respect to Kim's argument, the Ministry of Finance and Economy said all of the disbursements from the IMF had been used to replenish the country's foreign exchange reserves thus far. ''We have no idea of whether there is such a task force in the U.S. administration. However, due to our agreement with the IMF, there is no possibility of a misuse of funds,'' said an MOFE official. He said the IMF makes it a rule to inspect how the provided loans are used. Since an agreement was reached on the $58-billion rescue package in early December, the IMF has disbursed $18 billion to Korea thus far. The World Bank, which pledged $10 billion to the package, has provided $5 billion and the Asian Development Bank has offered $3 billion out of the $4 billion it's committed. ''Loans from the World Bank and the ADB can be used to finance financial sector restructuring, but it is questionable as to whether this should be seen as indirect aid for the corporate sector,'' the official said. According to press reports, many American companies have deep-rooted doubts about Korea's honesty in its distribution of funds.

To: Norrin Radd who wrote (3981)	9/18/1998 10:35:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

ANALYSIS - NOTEBOOK PCS GENERATE DEMAND FOR OLDER DRAMS TOKYO, Sep 18, 1998 -- The supply of conventional synchronous DRAMs is tightening as major domestic chipmakers shift the emphasis to high-performance 64-megabit dynamic random-access memories (64M DRAMs) called PC-100 standard models, reflecting firm demand for notebook personal computers. Intel Corp. and other microprocessor manufacturers have raised the clock frequency for driving memories and other external parts from 66 megahertz to 100mHz in the newest models, for which PC-100 standard DRAMs are compatible. While domestic shipments of desktop PCs fell 27% year on year in the April-June quarter, shipments of portable PCs, including notebook models, grew 7%, reflecting the popularity of slim models, according to the Japan Electronic Industry Development Association. Portable PCs now make up about 50% of domestic shipments. Some desktop PCs use the newest microprocessors, but most notebook models still use microprocessors of 66mHz external clock frequency, for which conventional DRAMs are sufficient. Despite growing demand for notebook PCs, major chipmakers are boosting the production of PC-100 standard memories, reducing the supply of older models. In the U.S., PC-100 standard 64M DRAMs were priced 20-30% higher than conventional synchronous models in July, but the price gap has shrunk to about 5%. However, PC-100 DRAMs will dominate in the near future, reducing demand for older models.

To: Norrin Radd who wrote (3981)	9/18/1998 1:19:00 PM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

the two largest foundries, TSMC (2330.TW, rated 1-buy) and UMC (2303.TW, rated 3-Neutral), all reported decent sequential revenue growth (25% and 28% respectively). Second, aggregate revenue for the group of five back-end companies grew by 5% from July.. August sales for Taiwan semiconductor companies were up 11% sequentially, but down 9% year on year. * August sales for Taiwan PC and peripheral companies were a 20% year on year increase and 2% sequential increase. * We believe September sales should be better sequentially. lehman.com