After months of cutting back DRAM production,
                 South Korean chip makers are suddenly hiking
                 64-megabit 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
                 percent to 40 percent 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 chairman, president, and CEO Steven
                 R. Appleton had earlier credited the South Korean
                 manufacturing cutback with stabilizing the
                 market. Indeed, for the past few months,
                 64-megabit 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, in
                 Aliso Viejo, Calif. 

                 The firmer prices even gave rise to a report that
                 swept Wall Street recently, speculating that a
                 tighter 64-megabit supply would prompt Micron to
                 raise its prices. Micron responded by saying 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 chips could unravel
                 some market projections that are indicating
                 higher DRAM prices for 1999. 

                 Bruce Bonner, an analyst at San Jose, Calif.-based
                 Dataquest, said the jump in output is designed to
                 take advantage of a seasonal uptick associated
                 with fourth quarter OEM demand. 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." 

                 Analyst Steve Pelayo of Morgan Stanley Dean
                 Witter Equity Research, in Menlo Park, Calif.,
                 agreed, saying the South Korean DRAM ramp-up
                 along with the post-holiday demand drop 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., confirmed last week that after
                 having cut production to 12 million units monthly,
                 it will now boost 64-megabit output 40 percent, to
                 17 million units, by the end of the year. 

                 LG Semicon Co. said it will increase 64-megabit
                 DRAM production 36 percent, from a low of 11
                 million units per month to 15 million units, by
                 year's end. And Hyundai Electronics Industries Co.
                 will also raise monthly production to 15 million
                 units -- a 25 percent 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-megabit
                 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
                 percent more 64-megabit DRAM devices 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-megabit DRAM devices 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.