Samsung puts chips on ice

But only for eight days

Samsung is suspending semiconductor production, in its fourth shut-down of the year. Starting tomorrow, the production moratorium will last for eight days and will affect both memory and non-memory semiconductor production lines. But the main thrust is to reduce DRAM production, thereby reducing the worldwide glut of memory components. Samsung is the world's biggest DRAM producer with 19 per cent of the world market. This week, a potentially strong competitor was created in its own backyard through the Korean-brokered merger of the lossmaking semiconductor interests of LG and Hyundai. The new company will account for 16 per cent of the worldwide DRAM market, leapfrogging NEC and Micron into second place. However, the merger is not expected to be smooth. Korean chaebols are not noted for their love of each other: expect tough negotiations over equity, management control and responsibility for outstanding debt. The companies also use different methods of chip production; this will limit early scope for making scale economies, especially in light of the political difficulty Korean companies face in making large-scale redundancies. This year has seen a modest revival in DRAM prices, since Samsung and Korean rivals LG Semicon and Hyundai Electronics began their DRAM production cutbacks. But in the face of systemic over-production, worldwide it will be interesting to see if the vendors can make these price rises stick. ®

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