Amid an ongoing labor dispute that could adversely affect global DRAM supply and pricing, the Korean government last week put additional pressure on Hyundai Electronics Industries Co. Ltd. to complete its acquisition of LG Semicon Co. Ltd.
Government officials met with the leaders of both companies and emerged with an agreement for Hyundai, among other things, to hire all LG employees. But the agreement apparently did not go as far as to guarantee jobs for seven years, which is what local unions were demanding.
The labor dispute escalated last week when a seven-day walkout by workers shut down all of LG's fabs in Korea.
A senior Hyundai executive in the United States said the company is eager to reach an agreement with LG so the two sides can begin developing a common market strategy.
"We're very interested in getting this agreement signed so we can begin the integration process," said Mark Ellsberry, vice president of marketing for Hyundai Electronics America's semiconductor division, San Jose. "Our feeling is that once the LG people see what our plan is, there isn't going to be any major concern. But right now we're not in a position to share that with them."
Ellsberry expects an agreement to be reached by mid-February. "There's a deadline of Jan. 31, and a lot of people thought we'd miss it," he said last week. "But the minister of commerce has reiterated his position that this get done. A lot of people paint this as a bad idea, but at the end of the day they have to give us some credit for ?? trying to put together an entity that will work."
LG Semicon is the world's fourth-largest DRAM producer, with an estimated 7% worldwide market share. Executives at rival memory suppliers Micron Technology Inc. and NEC America Inc. said OEMs might start feeling some effects from the work stoppage if it continues.
Buyers in the spot market, which LG supplies, are "edgy," said Paul Myers, DRAM commodity marketing manager for the American IC Exchange, an independent distributor in Aliso Viejo, Calif. "Buyers are calling us every day to check the situation but so far haven't placed any pre-emptive orders."
DRAM demand has remained unusually strong after the holiday selling season, Myers added. Still, there is some supply coming into the spot market, including LG memory chips, he said. One reason could be the return of Micron's chips to the spot market this month, resulting from that company's steep production ramp.
Myers said AICE is also seeing increased interest from OEM buyers, who have predominantly restricted DRAM purchasing to their own contracts with memory makers. The first sign that OEMs are getting nervous, he said, is their increasing demand for longer-term direct-purchase contracts with producers.
"I hear from a lot of semiconductor producers that they're being asked for contracts extending several months," Myers said."
Andrew MacLellan contributed to this story.