By Craig Addison
With DRAM-dependent Korea hit by the rout in memory prices over the past year, it’s no surprise that chipmakers there have cut capital spending to the bone. But what may be surprising is that for Korea, the worst year in the history of the semiconductor industry turned out to be a better one than 1998, when the country nearly went bankrupt and had to be bailed out by the IMF.
Korea’s capital equipment spending plummeted 53% year-on-year to $1.2 billion in 1998 — the height of the Asian Financial Crisis — but the fall in 2001 was 42% year-on-year to an estimated $2.1 billion, according to SEMI figures. Korea was also able to maintain its relative share of worldwide capital expenditures at 8% over the past two years, whereas Taiwan saw its share almost halve from 20% in 2000 to 12% last year.
For 2002 semiconductor capex in Korea is expected to fall 10% to $3.5 billion, according to the Korean Semiconductor Industry Association. [KSIA’s figures, which are higher than SEMI’s because they include expenditures on R&D and other items, put 2001 spending at $3.9 billion.]
While that’s more bad news for equipment and materials suppliers, Samsung Electronics Co. is providing some relief. Although the company cut its overall capital spending by 40% this year, the memory chip operations have been allocated about $1.15 billion for 2002 — a respectable amount given the slimmed down capex budgets of other major IDMs.
“We see some opportunity for Samsung’s 300mm pilot line this year,” said Ben Chen, VP and GM of Asia for PRI Automation. “We also expect a 300mm fab from Samsung, but maybe not until next year.”
By comparison, financially strapped Hynix Semiconductor is at the bottom of the DRAM ladder when it comes to capital expenditures. But if the company is to be believed, it gets a lot more bang for the buck.
“With one third of our competitors’ capex, we successfully operated 0.18-micron fabs to 0.15 and full volume production and came up with [good] manufacturing yields,” noted Youm Huh, exec. VP of the non-memory division at Hynix.
In spite of what he called “a really tough year for Hynix,” Huh said the company “demonstrated its engineering and manufacturing capability in achieving the most competitive manufacturing cost for 0.15-micron-based DRAM.”
In any case, what little money Hynix has to spend has been on hold because of the prolonged negotiations with DRAM maker Micron over possible merger or joint venture agreements. Another casualty of the on-going negotiations was a proposal announced in December for Hynix to sell some of its non-memory fabs to a consortium of fabless Korean IC design houses. That is now on hold pending an outcome of the Hynix-Micron talks, according to industry sources.
With capital expenditure budgets under pressure, the name of the game this year will be making the most of what’s already installed.
“Korean chipmakers are very cautious and not confident about recovery,” said Hye-Bum Choi, a director of the KSIA. “The focus is on boosting productivity, not building new fabs.”
For tool suppliers, that means keeping the communication lines open with their Korean customers to ensure they are positioned to benefit from the upturn, when it comes.
“We are focused on positioning ourselves with regard to the technology for the 300mm transition, for the copper transition … as well as advanced process control,” said Dean Duffy, VP of sales for FSI International. “The downturn has given us the opportunity to work with these customers, to support them with the recipes, the equipment configurations, and the integration activities necessary so we are in a position [to benefit] during the upturn.”
While Korea is known for its DRAM device prowess, the country has also developed a large number of manufacturers of components and systems for fabs and back-end operations. In fact, two-thirds of the exhibitors at SEMICON Korea over the past two years have been local companies.
An example of a local toolmaker is A-Tech Ltd., which manufactures wet stations and sputtering systems. Besides selling to Korean customers, “we will focus on China, Taiwan, and Malaysia,” said company President S.K. Suh. Still, despite Korea’s fierce nationalism, the country’s leading chipmakers prefer to buy known-brand equipment. “For major equipment in the wafer fab, they buy 99% from outside Korea,” noted Suh. “Non-critical equipment they will buy from Korea.”
While Korea’s chipmakers have felt the icy winds of the DRAM market for several months, the same can’t be said of Seoul, which has had a particularly mild winter this year. “We expect an early spring this year so I hope to see an earlier recovery coming from Seoul too,” said Huh of Hynix. Even his competitors would agree with that.