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To: MileHigh who wrote (59)	11/25/1998 9:39:00 PM
From: MileHigh	Read Replies (1) \| Respond to of 236

A service of Semiconductor Business News, CMP Media Inc. Story posted 2 p.m. EST/11 a.m. PST, 11/25/98 Koreans boosting DRAM output, raising industry concerns By Jack Robertson SEOUL--After months of cutting back DRAM production, South Korean chip makers are suddenly hiking 64-Mbit output to record levels, leaving rivals to wonder if the increase will disrupt a new and precarious period of pricing stability. The production spike, which varies from 25% to 40% depending on the supplier, has been attributed to a variety of factors, including a desire by South Korean vendors to cash in on firmer DRAM prices, a need to amortize costs over larger IC shipments, and a natural outgrowth of a shift to finer chip feature sizes. Analysts, and even vocal rivals such as Micron Technology Inc.'s chairman, president, and chief executive Steven R. Appleton, had earlier credited the South Korean manufacturing cutback with stabilizing the market. Indeed, for the past few months, 64-Mbit DRAM prices have shown signs of a resurgence, increasing from the low $9 range to well over $10 on the spot market, according to independent distributor American IC Exchange (Aliso Viejo, Calif.). The firmer prices even gave rise to a report that swept Wall Street recently, speculating that a tighter 64-Mbit supply would prompt Micron to raise its prices. Micron responded by saying that it defers to the global DRAM market to set purchase prices. Now, however, with South Korean vendors turning on the production spigot once again, the anticipated surge of memory chip deliveries could unravel some market projections that indicate higher DRAM prices for 1999. The jump in output is designed to take advantage of a seasonal uptick associated with fourth-quarter OEM demand, according to analyst Bruce Bonner Dataquest in San Jose. Holiday demand can accommodate the production increase without upsetting the market for now, Bonner said. "The big question is what happens in the first quarter of 1999, when demand historically turns down," he said. "If the Korean companies continue to produce DRAMs at the same high levels, there could be an adverse impact on prices." Agreeing is analyst Steve Pelayo of Morgan Stanley Dean Witter Equity Research in Menlo Park, Calif. He noted that the South Korean DRAM ramp-up along with a post-holiday drop in demand could once again depress memory prices. Just what is driving the South Korean policy reversal is open to question, but one thing is certain: Output levels are on the rise. The industry's leading DRAM maker, Samsung Electronics Co. Ltd., confirmed this week that after having cut production to 12 million units monthly, it will now boost 64-Mbit output 40% to 17 million units by the end of the year. LG Semicon Co. Ltd. said it will increase 64-Mbit DRAM production 36%, from a low of 11 million units per month to 15 million units, by year's end. And Hyundai Electronics Industries Co. Ltd. will also raise monthly production, to 15 million units -- a 25% increase -- by the end of the year, according to a company spokesman. A spokesman for LG Semicon said his company is aiming to take advantage of higher 64-Mbit prices to get better margins on its memory chips. He added that increased output will help lower costs by spreading fixed expenses over a larger number of chips. The jump in DRAM production is also the inevitable result of a rapid shift to sub-0.25-micron feature sizes, which can yield as many as 30% more 64-Mbit DRAMs per wafer. Samsung started making chips on a 0.22-micron process in July, and Hyundai followed in September. LG Semicon said it is also producing 64-Mbit DRAMs on 0.22-micron lines and will move to 0.20 micron by the end of the year. Samsung is also adding fab capacity at its Austin, Texas, facility, doubling production later next year to 24,000 wafer starts per month. Hyundai and LG are locked in a battle to see which company can gain the better position in the chip market. The victor could be granted a controlling interest when the companies' semiconductor operations are merged under a plan outlined earlier this year. --------------------------------------------------------------------------------