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To: PAinvestor who wrote (42100)	1/9/1999 11:33:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 53903

Hyundai out on top -- Will acquire LG Semicon; could become the largest supplier of 64-meg chips Jack Robertson Hyundai Electronics Industries Co. Ltd.'s pending acquisition of LG Semicon Co. Ltd. promises to change the landscape of the memory-chip business and create new challenges for OEM buyers. LG Group's decision to sell its chip business outright came less than two weeks after the company rejected a mandate by the South Korean government to merge its chip operations with Hyundai's. When it rejected the deal, which would have put Hyundai in control, the government took steps to cut off LG's credit lines. Despite indications from company insiders that LG would battle the proposal-maybe for months-the chaebol decided instead to get out of the chip business altogether. So Hyundai now looks to become one of the world's top 10 chip suppliers. The combined chip revenue of Hyundai and LG Semicon last year topped $4.5 billion, just behind that of rival Samsung Electronics Co. Ltd., according to Dataquest Inc., San Jose. In a complicated transaction, Hyundai will buy out LG Semicon's stock and pay an undisclosed sum for LG's R&D expenditures, among other things. Analysts believe the figure is between $1.8 billion and $2.2 billion, but the actual number will grow to more than $5 billion, since Hyundai also agreed to assume LG's outstanding debt. Based on current output levels, Hyundai could be the world's largest producer of 64-Mbit DRAMs. LG and Hyundai are each making 15 million 64-Mbit chips a month. The combined monthly output of 30 million far exceeds Micron Technology Inc.'s 18 million to 20 million chips a month, and Samsung's 17 million to 18 million. The increased production economies of scale could also give Hyundai more sales leverage, in light of the fact that the global DRAM market will have just three or four dominant players, each with about a 20% share. Analyst Sherry Garber of Semico Research Corp., Phoenix, predicts that Hyundai will become a broader DRAM player by adding LG's spot-market sales business to its own OEM contract business. Hyundai is also expected to consolidate the separate distribution channels of the two companies, Garber said. The acquisition, however, isn't likely to result in any immediate closings of 8-in.-wafer fabs, as had been widely anticipated. That could be good news for OEM chip buyers, who might be concerned that Hyundai would consolidate some fabs and thus create a shortage of chips in the near future. Garber believes it will take Hyundai six months to a year to analyze the new LG operations it will receive. "They're not going to make any quick moves on fabs until they know what they have and how to consolidate operations," she said. LG Semicon operates five 8-in.-wafer fabs in South Korea, and Hyundai has four in that country, as well as a new fab in Eugene, Ore. Both suppliers also vowed not to effect any major layoffs, virtually assuring that the largest fabs of both companies will continue operating. Outdated 5-in.-wafer fabs might be shut down, but they never produced 64-Mbit devices; their loss will have no effect on the global supply of 64-Mbit DRAMs, Garber noted. It remains to be seen whether Hyundai can afford to upgrade any of LG's older fabs. For one thing, Hyundai doesn't have the cash available to make a substantial conversion of the LG fabs, according to Danny Lam, a semiconductor management consultant in Auburn, Ala. "Hyundai is struggling to finance just its own large capital investments," Lam said. "It doesn't have [the] assistance that Micron got from TI financing, and a $500 million cash infusion from Intel." Hyundai will be hard-pressed to finance critically needed capital investment because of its growing debt load, Lam said. Indeed, since Hyundai agreed to assume LG's debt as part of the deal, the company is burdened with an estimated $10 billion in outstanding loans. Some believe Hyundai will continue to operate LG's trailing-edge fabs in order to serve OEMs that still need 16-Mbit and lower-density FPM and EDO DRAM chips. Hyundai might convert an older-technology LG fab into a logic foundry, reviving its desire to enter the foundry business. Those ambitions were sidetracked during last year's financial crisis, when Hyundai was forced to sell its U.S.-based logic fab-Symbios Inc., in Fort Collins, Colo.-to LSI Logic Corp., Milpitas, Calif. One likely benefit of the acquisition will be to reduce the U.S. dumping penalty of 9.28% on DRAMs imported from LG fabs to the 3.9% duty levied against Hyundai's DRAMs. A Hyundai trade attorney in Washington believes Hyundai's rate will prevail. The acquisition raises renewed questions over the fate of two stalled fabs in the United Kingdom-LG's in Wales, and Hyundai's in Scotland. Should Hyundai decide to go ahead with any European expansion, only one of those facilities is expected to be equipped. Most analysts predict that Hyundai's current shell building in Scotland will get the nod. Copyright ® 1999 CMP Media Inc. techweb.com

To: PAinvestor who wrote (42100)	1/9/1999 4:47:00 PM
From: Skeeter Bug	Respond to of 53903

pai, i thought you knew the answers. why all the questions. your tune sure changes quickly. we'll be sure to remember that when you state things in the future... ;-) i use several different investing techniques and options is one - though a small component of my overall portfolio. i do have to say it is the most fun, though. i rarely get attacked by bears on my longs ;-) must be an emotional predisposition or something...

To: PAinvestor who wrote (42100)	1/16/1999 1:14:00 AM
From: eabDad	Read Replies (1) \| Respond to of 53903

Mr. PAi- Let me introduce myself as the EAB referenced, actually you can call me "Z". You seem knowledgeable, but certainly have a narrow source of information IMO. BTW, I have spent years in this biz, and I will remind you that you have no idea who I really am, so I emplore you not to emotionally respond. Before I get started, I should disclose that I have a net long position in MU which is partially hedged through covered calls rotating in upward spreads over the months. I will also agree that we are setting up for a DRAM shortage in 2000, but I'm sorry, not in 1999 until people build inventory for y2k. You claim that Hyundai/LG is behind and cannot compete on the leading edge. Do not be deceived by surface analysis and sources from Japan. While LG is probably third in the Korean 3 as far as advanced tech, and Samsung is #1, they all have 0.25-micron fully qualified and moving smaller. Samsung has 0.20 qualified. My company contacts at each place Samsung, and the combined Hyundai/LG, spending slightly more in 98 than MU. While LG will spend less than $100 million in 99, the combined Hyundai/LG will spend between $800-900 million. This number is roughly par with Samsung and MU. How can they afford it, you might ask? The DRAM market is cash flow positive right now... Do I believe there will be fallout from Hyundai/LG? ... yes. Say goodbye to Wales. Close a couple fabs which made little difference anyway. Hyundai/LG will be one of the resulting top 5 survivors - the government will make sure in the end. MU is and always has been ahead of the pack in shrinks, and is the low cost producer. I agree with your premise of an industry shakeout in 99, and this will set the stage for next year. In the meantime, while the trend is up and I am riding it on MU stock, fundamentals will catch up and a sizable correction is ahead of us this year. At which time, I will be buying for a target price of $160-180 by mid-01. Z