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To: Norrin Radd who wrote (4593)	1/29/1999 10:37:00 PM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

DRAM buyers getting “edgy” as Hyundai, LG deal lingers By Jack Robertson Electronic Buyers' News (01/29/99, 05:05:08 PM EDT) Amid an ongoing labor dispute that could adversely affect global DRAM supply and pricing, the Korean government has put additional pressure on Hyundai Electronics Industries Co. Ltd. to complete its acquisition of LG Semicon Co. Ltd. Government officials met with the leaders of both companies and emerged with an agreement for Hyundai, among other things, to hire all LG employees. But the agreement apparently did not go as far as to guarantee jobs for seven years, which is what local unions were demanding. The labor dispute escalated this week when a seven-day walkout by workers shut down all of LG's fabs in Korea. A senior Hyundai executive in the United States said the company is eager to reach an agreement with LG so the two sides can begin developing a common market strategy. “We're very interested in getting this agreement signed so we can begin the integration process,” said Mark Ellsberry, vice president of marketing for Hyundai Electronics America's semiconductor division, San Jose. “Our feeling is that once the LG people see what our plan is, there isn't going to be any major concern. But right now we're not in a position to share that with them.” Ellsberry expects an agreement to be reached by mid-February. “There's a deadline of Jan. 31, and a lot of people thought we'd miss it,” he said last week. “But the minister of commerce has reiterated his position that this get done. A lot of people paint this as a bad idea, but at the end of the day they have to give us some credit for ... trying to put together an entity that will work.” Buyers in the spot market, which LG Semicon supplies, are “edgy,” said Paul Myers, DRAM commodity marketing manager for the American IC Exchange, an independent distributor in Aliso Viejo, Calif. “Buyers are calling us every day to check the situation but so far haven't placed any pre-emptive orders.” DRAM demand has remained unusually strong after the holiday selling season, Myers added. Still, there is some supply coming into the spot market, including LG memory chips, he said. One reason could be the return of Micron's chips to the spot market this month, resulting from that company's steep production ramp. Myers said AICE is also seeing increased interest from OEM buyers, who have predominantly restricted DRAM purchasing to their own contracts with memory makers. The first sign that OEMs are getting nervous, he said, is their increasing demand for longer-term direct-purchase contracts with producers. “I hear from a lot of semiconductor producers that they're being asked for contracts extending several months,” Myers said.” ebnews.com

To: Norrin Radd who wrote (4593)	1/30/1999 6:56:00 PM
From: DJBEINO	Read Replies (2) \| Respond to of 9582

LG to Hyundai: 'Dear John ...'? (Very intresting reading) Jack Robertson More than a few analysts think LG Semicon is stonewalling. They suspect the Korean chip maker has little intention of selling to Hyundai Electronics Industries, and is simply waiting for the global DRAM market to take off. If that happens, the rationale for consolidating the two companies evaporates. Global oversupply disappears. Memory-chip prices climb-and profits return. And LG can tell the Korean government that the premise for merging the two DRAM makers no longer exists. LG fab employees threw another monkey wrench into the LG-Hyundai situation. First they embarked on a work slowdown, then walked off the job completely at the Chungju DRAM plant-all in protest against Hyundai's refusal to give them seven-year guaranteed employment after the acquisition. Since LG itself made much the same demand for tenure for its employees, the labor disruptions at its fabs may not upset the company all that much. The effect on sales will depend on how long the labor dispute lasts. But this can only result in firming the DRAM market even more. Any extended drop in LG production will further erode the already diminishing global DRAM oversupply, pushing prices up. LG might then find itself in a much stronger DRAM market when fab employees resume normal operations. A wide gulf exists between LG's stock value, estimated at $1.8 billion to $2 billion, and its demands for an acquisition price that's a stiff premium above that amount. Hyundai, already saddled by its own estimated $6 billion in debt, can't afford to pay top dollar for LG, especially since it will also wind up with the LG chip operation's $4 billion in debts added to its own. And it isn't clear that Hyundai is all that eager to take over its chip rival. In the shotgun marriage brokered by the Korean government, Hyundai must try to absorb LG's disparate DRAM designs and production lines without playing havoc with its own operations. Analysts claim that LG needs extensive upgrading of its fabs to deep-UV-lithography sub-0.25-micron processes. Hyundai, meanwhile, is struggling to finance costly technology upgrades at its own fabs. It's doubtful that Hyundai could come up with yet more capital to convert any LG fabs it might acquire. Even if the DRAM market does take off and LG convinces everyone the merger is no longer warranted, the company still faces a heavy need for capital to upgrade its fabs. But LG has been slicing down its debt, and might argue that it would be in better shape to finance the job alone than would a merged entity with far more oppressive debt. Will the reluctant bride leave the suitor standing at the altar? Stay tuned to this long-running Korean DRAM soap opera. Copyright ® 1999 CMP Media Inc. techweb.com