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To: Steve Smith who wrote (39892)	10/13/1998 11:14:00 PM
From: DJBEINO	Read Replies (2) \| Respond to of 53903

Samsung Semiconductor Business Profitable Even as Prices Slip, CEO Says Bloomberg News October 13, 1998, 4:33 p.m. PT Seoul, Oct. 14 (Bloomberg) -- Samsung Electronics Co. said its semiconductor unit is earning a profit even as it cuts production to bolster flagging chip prices. The price of 64 megabyte dynamic random access memory chips, the industry standard, tumbled almost 60 percent this year. DRAM computer chips are essential parts of electronic devices ranging from computers to mobile phones. In response, Samsung, the world's largest memory-chip maker, began shutting down its plants for one week a month in June to reduce production and bolster prices. ''We are making a profit in the DRAM business and have never been in the red,'' Chief Executive Lee Yoon Woo said in an interview. ''Our production cuts are designed to protect the price of 64-megabyte DRAMs at a certain level. Following our production cuts, 64 DRAMs should stay at around the $10 level until the end of the year.'' Samsung Electronics, the cash cow of the Samsung business Group, which makes everything from ships to computer chips, earned a net 150 billion won ($112 million) in the first half of this year. Lee said the company will better that performance during the second half. Skeptics Some analysts are less optimistic. ''We are forecasting Samsung Electronics will turn in a net profit of around 232 billion won for the year, based on a huge retirement grant they will pay and a downturn in the DRAM business,'' said Tony Jung, an electronics analyst at Socgen Crosby Securities Co. Though Samsung had a price premium on sales of 64- megabyte DRAMs after mass-producing them quicker than rivals, it is probably being hit now by tumbling prices along with other manufacturers, Jung said. ''Samsung sold a lot of 64 DRAMs when the price was around $20 dollars, boosting their average sale price for the chips, but now the price is around $10, and they have little room to cut costs.'' Yet Samsung, which accounts for 8.7 percent of Korea's stock-market capitalization, may have the edge on its rivals because of better technology, said Lily Wu, an electronics and semiconductors analyst at Solomon Smith Barney Inc. in Hong Kong. ''Samsung's profitability is perfectly possible given the advantage in technology that they enjoy,'' Wu said. ''They are one step ahead of the price curve and have a better product range than their competitors including higher value products.'' Mergers Demand is still strong, even for older generation 16- megabyte chips, Lee said. ''While the 16 DRAM is now considered too bulky for PC use -- most PC manufacturers are switching to an average of 90 megabytes per machine from the first quarter next year --there are still a host of other applications which are keeping demand strong.'' The Korean government recently began to try to force the top five Korean conglomerates to concentrate on core businesses by swapping or merger subsidiaries and -- judging that Korean cannot afford three chip makers -- is pressuring LG Semcicon and Hyundai Electronics into a merger. The creation of a domestic rival, potentially with the same DRAM capacity, is positive for the industry, Lee said. Even so, he said the merger won't be easy. ''The two companies have cultural differences which will take a long time to overcome. There is no synergy factor in their merger, they will need time to optimize and consolidate.'' Still Hiring Samsung's own plans to restructure don't include redundancies, Lee said. ''Samsung is downsizing through voluntary retirement,'' Lee said. ''There have been no redundancies and there is no plan to close any plants. We are still hiring but at a reduced rate.'' Lee said Samsung intends to maintain capital spending at the current levels of $1 billion per year into next year. Like other Korean firms, Samsung Electronics switched to selling domestic bonds as the cost of borrowing overseas was pushed up by the 22 percent fall of the won against the dollar in the last year. Samsung plans to sell 500 billion ($362.3 million) bonds Oct. 16 after selling the same amount last month. Samsung has already delayed the fitting-out of its ninth production line at its Kiheung plant near Seoul, concentrating instead on upgrading existing lines to 0.2 micron technology, which allow more chips to be produced from a single wafer.