Tue, Oct 30, 2001 page21

• Samsung expects earnings to improve

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  Samsung Electronics Co, the largest maker of computer-memory chips, expects its semiconductor earnings to improve in the fourth quarter this year, said Hwang Chang-gyu, president of the company's memory division.

  The improvement for the unit, which had an operating loss of 380 billion won (US$294 million) in the third quarter, will come from more demand for certain types of chips that Samsung dominates the market for, Hwang said. He declined to give details or forecast whether the division will return to profit.

  

  Hwang Chang-gyu, president of Samsung Electronics' memory chip division, displays a 12-inch wafer in Seoul yesterday. The world's largest memory chipmaker plans to use the bigger wafer to mass produce chips starting in late next year.

  PHOTO: REUTERS

  Hwang made the comments at a press briefing held by Samsung to explain its business strategy in a market where sales of its main product are forecast to fall as much as 67 percent by value this year, according to Dataquest Inc.

  Samsung said it will continue with the strategy that made it the last of the 10 major producers of dynamic random-access memory chips, the main memory for personal computers, to be forced to record a loss as the spot price fell under the cost of production.

  Hwang said Samsung will try to maintain pressure on its rivals by attempting to be the first to mass-produce higher capacity chips at lower costs. The shift to such chips earlier than opponents enables the company to sell its product at a higher average price while they are relatively scarce.

  Samsung said it will begin mass-producing 512Mb DRAM chips and could increase output next year to meet rising demand.

  Currently, most personal computers have about 128Mb of main memory.

  Hwang said he expects the worldwide market for computer chips to start to improve as early as the second half of next year.

  The company last week said third-quarter profit tumbled 75 percent as its memory chip business had a loss, with prices falling to half the cost of production.

  Net income in the three months ended September dropped to 420 billion won (US$323 million) from 1.7 trillion won a year earlier.

  The chip business's operating loss compared with a 300 billion won profit in the previous quarter.

  Samsung yesterday shrugged off concerns about the global drop in memory chip prices, saying it will complete a chip upgrade by 2003 that allows it to more than double output.

  The world's largest memory chip maker said the upgrade -- producing chips on 12-inch silicon wafers instead of the current eight-inch wafers -- will cut production costs. It did not disclose details.

  "We don't mean to increase production right away. We are laying the foundation for expansion when chip prices rebound," said Chung Deuk-si, a Samsung spokesman.

  But Hwang predicted that chip prices will rebound next year. A 128MB dynamic random access memory chip is currently sold at US$1, down from US$10 from a year ago.

  Hwang anticipated a US$500 billion memory chip market in 2005, with Samsung controlling 40 percent of the market. Samsung's share of the global chip market was 20 percent last year.

  South Korea's Hynix Semiconductor Inc, the world's third largest chipmaker, said it recorded a net loss of 1.62 trillion won (US$1.24 billion) during the July-to-September period.

  In July, Hynix announced a six-month halt of its only overseas production plant in Eugene, Oregon.

  On Thursday, Hynix said its 14,000 workers will all take one month of unpaid leave between Nov. 1 to March 31.

  Hynix has been struggling under US$6.6 billion in debt since 1999.

  Government-controlled creditor banks have bailed out the chipmaker several times in the past year.

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