Asian Capital spending cuts seen

04/01/1998

Asian capital spending cuts seen

The Asian financial crisis is evolving on several fronts, with semiconductor capital spending plans in South Korea and Japan coming under heavy pressure even as stock markets in the two nations start to show signs of life.

Analysts from a variety of organizations now expect Korea`s chip companies to slash their 1998 spending by anywhere from 50-60% off 1997 levels. Japanese firms are currently seen cutting about 10% from their budgets with further cuts possible. As a result, there is a possibility that the world market for semiconductor equipment could contract during the new year, despite generally strong spending in the US, Europe, and Taiwan.

Morgan Stanley Dean Witter analyst Jay Deahna disclosed a revised worldwide capital spending forecast, predicting an 11.5% drop in Japanese spending in the coming FY in yen terms, down from a previous estimate of an 8.6% drop. Translated into dollars, and assuming a yen-dollar rate of 130 rather than 120, the year-to-year drop would be 17.0%, down from a previous estimated decline of 10.1%, with a total investment of $7.6 billion (see table).

With all of the top five Japanese chipmakers reportedly planning capital cuts for the coming fiscal year, which begins this month, Hitachi, the third-largest and most DRAM-dependent of the group, said it will halt production at eight Japanese wafer fabs for about two weeks in an effort to cut its inventories of 16-Mbit DRAMs and other unprofitable parts. The shutdown will reportedly not affect non-Japan facilities, most of which are joint ventures. These include the TwinStar fab in Texas, a joint venture with Texas Instruments. DRAM output is to be cut to 8 million units/month, down from an original plan of 9 million. - WaferNews