Samsung to spend $1.2 b on chip technology

By Kim Miyoung

SEOUL: Technology giant Samsung Electronics Co unveiled a $1.2 billion plan for upgrading South Korean chip facilities. The world's top memory chip maker will invest 1.47 trillion won ($1.23 billion) on equipment to produce memory chips using next generation 12-inch wafers, the company said in a filing to the stock exchange.

A 12-inch (300 mm) wafer can yield more than twice as many chips as an eight-inch wafer, the current industry standard, helping chip makers save production costs in the highly cyclical sector.

"The decision implies Samsung maintains a bullish outlook for the second half of 2003 as it has been more cautious and slower than rivals like Infineon in introducing the next-generation facilities," said Simon Woo, an analyst at Hyundai Securities.

Samsung, currently the only profitable memory chipmaker in the world, had fallen behind in introducing 12-inch lines, even as a record plunge in memory chip prices last year forced the industry to cut costs and seek partnerships.

German chip-maker Infineon Technologies AG and Taiwan's Nanya Technologies said in November they would jointly build a similar wafer plant. "Still Samsung may have yet to wait until 2004 to reach a breakeven-point as yield from the new line will be not that high at the beginning," Woo said.

Catching up with rivals

Samsung has said it would keep spending on core production facilities to maintain its world pole position in market share and profitability. Samsung earmarked 4.1 trillion won this year for upgrading semiconductor facilities, dwarfing a 1.3 trillion won budget its weaker domestic rival Hynix Semiconductor Inc put aside.

It aims to begin mass production of DRAM (dynamic random access memory) chips and flash memory chips in the third quarter of 2003 at the facilities being expanded, located just south of capital Seoul. DRAM is the most common type of memory chips used in computers and some other electronic products.

Samsung, also the world's third-largest mobile handset maker, said in October third-quarter profits quadrupled to 1.73 trillion won from a year ago, on strong mobile phones sales, and forecast a turnaround in chip demand next year.

Second-ranked Micron Technology Inc of the United States posted eight quarterly losses and Hynix recorded nine quarterly losses over the past 11 quarters. Samsung shares, which have risen 12 percent this year for a market capitalization of 48 trillion won, closed 6.6 percent lower at a two-month low of 314,000 won on Monday, this year's last trading day.

(US$1 = 1197.5 won)

© Reuters