Oct 29, 2001 South Korea's Samsung Electronics Co Ltd, the world's fourth largest chipmaker, aims to rank second by the end of 2005 and raise its share of the global memory chip market to 30 percent. Samsung, already the largest memory chip maker, is selling 40 percent of its chips for below production cost, reflecting a record downturn in the global chip market. Still, Korea's top big-cap share expects growth in non-PC sectors such as consumer electronics and network systems.
"So far the computer sector has mainly led the chip sector, which is the reason why some were pessimistic that the chip industry is now in a declining phase in line with slumping PCs," Hwang Chang-gyu, president of Samsung's memory chip division, told reporters on Monday. "But we expect growth in consumer electronics, communications and digital media sectors," Hwang said. "This will help the semiconductor industry remain as the core technology of the IT industry."
BOOSTING OUTPUT OF SRAM
Samsung has trimmed output of dynamic random access memory (DRAM) chips used for PCs and boosted production of non-DRAM chips such as flash memory chips and SRAM used mostly used in mobile phones and network servers.
"SRAM and flash memory chips will account for 50 percent of our memory chip unit by 2005 and the commodity DRAM portion will fall to 25 percent," said Hwang.
Samsung said it was targeting $20 billion in sales of memory chips by 2005 or 30 percent of market share - up from 17 percent in 2000.
Analysts said the 30 percent target was realistic but questioned the sales target.
"Given that the current memory market is worth $20 billion to $30 billion, Samsung's sales target of $20 billion with a 30 percent market share sounds too optimistic," said Simon Woo, chip analyst at Hyundai Securities. "I don't expect the market will grow so dramatically by 2005 and there are too many unpredictable factors to consider," he said.
Market researcher Gartner Dataquest has forecast a 67 percent contraction in the global DRAM chip market this year and an additional 19 percent fall next year.
One strategy Samsung and others plan to use to cut production costs and boost productivity is migration to 12-inch wafers to mass produce chips.
"We are ready to mass produce chips by using 12-inch wafers and adopting an industry-competitive 0.12 micron," Samsung's Hwang said. "That will help us to lower costs and capitalise on price recovery, which is expected to emerge in late 2002."
Micron is the measure of the distance between wires used to form a circuit on a computer chip. Currently Samsung produces chips using mostly 0.15 micron technology.
Shares in Samsung were up 3,000 won, or 1.7 percent, to close at 184,000 won ($142.4), outperforming a 0.82 percent rise in the benchmark index.
WINDOWS XP SEEN BOOSTING DEMAND
Samsung said chip demand was slowly picking up, led by computer makers. It expected its various products would help it cushion losses stemming from plunging DRAM spot prices in the fourth quarter.
"We have diversified chip products including DDR (double data rate) DRAM and Rambus DRAM," said Hwang.
Such products command higher prices than commodity chips and demand for them is expected to rise with PC demand in the wake of Microsoft Corp's new operating system, Windows XP.
"Windows XP will require 256 megabit chips and that will boost our revenues as we have a higher portion of 256MB chips compared to other rivals such as Micron Technologies Inc of the United States," said Hwang.
Samsung repeated its earlier position that it was not interested in merging its chip business with Toshiba Corp of Japan, the world's sixth-ranked DRAM maker and top flash memory chipmaker.
"We already have the largest market share of NAND flash memory chips," Chu Woo-sik, vice president of Samsung's investors relations team, told Reuters, referring to a cutting-edge technology developed by Toshiba Corp. "And merging flash unit with Toshiba means controlling nearly all the flash market, which will have more negatives than any synergistic effects," he said.
