Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: DJBEINO who wrote (42102)	1/9/1999 11:42:00 AM
From: PAinvestor	Respond to of 53903

Thanks DJ. Check this one out too. Hyundai purchase of LG Semicon leaves unanswered questions By Anthony Cataldo EE Times (01/08/99, 12:05 p.m. EDT) TOKYO — Hyundai Electronics Industries will buy all stakes in LG Semicon Co. under a deal that caps a five-month power struggle between the two. The companies were brought together by a South Korean government bent on reforming the country's major conglomerates. The tentative agreement settles a hard-won fight, but raises new questions about how the new company will come up with the cash to invest in new equipment to remain competitive, analysts said. The deal may also have implications for Hitachi Ltd., which had worked with LG on three successive generations of DRAM design. The merged semiconductor operations of Hyundai and LG, with a combined monthly DRAM output of more than 25 million units, will become one of the largest memory-chip makers in the world. However, analysts said that the company is so saddled with debt that it will have to solicit bids from outside investors in order to invest in new equipment. "They've already stated officially that they're looking for another chip maker to take a 20 percent equity stake in the new company," said Ilsuk Han, semiconductor analyst for ING Barings (Seoul, South Korea). Such an investment would be critical for the company to make the necessary upgrades to its production facilities in order to stay abreast of its rivals. "In the past it was Micron's upgrades and the Korean fab's additions that determined who could supply more DRAMs," Han said. "The playing field has leveled again, and it's going to be fab upgrades for everyone and a focus on getting more out of less." Since it now it appears that Hyundai will have full control over the new company, the likelihood of a management-related conflict between the two companies will probably subside. But they are reportedly arguing over the price of the deal. The buyout and other details probably won't be completed until the end of January, an LG spokesman said. With the details still up in the air, it's unclear how the new company will change the landscape of the DRAM industry now that Korea's three largest DRAM companies have consolidated into two major players — Samsung Electronics and Hyundai. Han of Barings also said LG was too dependent on Hitachi for DRAM technology, and sold 20 to 30 percent of its DRAM output to the Japanese DRAM vendor, whereas Hyundai had developed its technology independently and was more sophisticated at market research. In the short term, merging the two chip operations will probably do little to change the DRAM oversupply situation, Han said. LG, however, appears keen on getting a large cash infusion from Hyundai in return for giving up its stake in the new company. According to South Korean press reports, LG is demanding that Hyundai pay $4.34 billion for its stake in LG Semicon, and that half of the deal be paid to LG in cash. Hyundai executives were quoted as strongly objecting to LG's take on the value of LG Semicon. Analysts said it would be difficult for Hyundai to meet such a demand so soon after purchasing car maker Kia. Once the two sides come to an agreement, the new company will have to start mulling its investment and production strategy for the near future. Hyundai's buyout of LG could have negative implications for Hitachi, which had worked closely with LG on 4-, 16- and 64-Mbit DRAM designs. Further cooperation is less certain with Hyundai's purchase of LG. Hitachi also buys about 1 million 64-Mbit DRAMs a month from LG, which it resells under its own brand, an Hitachi spokesman said. Hitachi had been involved in a trilateral development agreement for 1-Gbit DRAMs that included Mitsubishi and Texas Instruments, but that agreement was dissolved after Micron Technology bought TI's memory business last year. "For the 1-gigabit generation, we don't know if we'll have a relationship with LG or not," a Hitachi spokesman said. "At this moment, we're doing it by ourselves." eetimes.com