SEOUL, South Korea -- Cash-strapped Asian IC companies are delaying plans to move to larger, 300-millimeter (12-inch) wafer lines by at least a year, as they scrounge for capital-equipment loans in the midst of the region's deepening financial crisis, according to equipment suppliers gathered here last week for Semicon Korea. The delays come after a carefully orchestrated push to shift the global industry to the larger wafer size in record time.

The situation threatens not only the generally accepted time line for the shift to 256-Mbit and denser DRAMs but also the health of the world's equipment suppliers. Having spent millions in recent years to develop 300-mm equipment, vendors now face a longer return on those hefty investments.

"The biggest problem is that the move to 300 mm requires the support of DRAM manufacturers, because they need [the larger wafers] more than the logic market," said Pankaj Raval, program manger for lithography-equipment manufacturer Silicon Valley Group Inc., which counts Intel Corp. among it biggest customers. "We will have a product, but for delivery and availability we'll have to wait until we get a clearer picture from our customers."

Semiconductor companies and suppliers had planned to start as many as nine pilot lines by 1998 and move to production in 2000 based on a set of standards announced in July. Now, pilot lines will likely start in late 1998 or 1999, and the first volume production lines aren't expected until 2001, said Murray Bullis, director of 300-millimeter wafer standards for Semiconductor Equipment and Materials International.

Chip makers can pack about 2.5 times more dice on a 300-mm wafer than on the current, 200-mm (8-inch) generation. Yet for DRAM companies beset by rock-bottom memory pricing and plunging capital-investment budgets, the cost of developing the technology and buying the equipment is prohibitive.

Equipment prices, on average, will be 50 percent higher than for 200-mm equipment, and some materials--such as bigger, sturdier, more complex wafers--will be more than four times as expensive. Some customers are asking equipment vendors to hold 300-mm pricing to no more than 1.3 times that of comparable 200-mm equipment.

Koreans act first
Korean chip companies, which manufacture one out of every three DRAMs in the world, are among the first to postpone their 300-mm plans.

"There's no change in p ilot-line plans in Korea, but overall they'll be slower to ramp up

because of the financial problems," said Rick Hill, chief executive officer of Novellus Corp., which has developed a chemical-vapor-deposition tool for 300-mm wafers. "We're ready, but the industry-wide ramp will be a year behind."

Capital investments will be less than $2 billion in 1998, down from about $3 billion last year, according to reports from the Korean Semiconductor Industry Association. The decline is more dramatic when compared with 1996, when LG Semicon alone spent $2.7 billion, Samsung $2.2 billion and Hyundai $2.1 billion, according to J.H. Son, who heads the Asian semiconductor service of Dataquest.

The sharp drop from the $7 billion in 1996 investments to the $2 billion or less expected this year had the equipment vendors at Semicon Korea in a state of deep concern. In a normal year, Korea accounts for about 10 percent of fabrication equipment and test and assembly systems.

Japanese companies, too, are delaying pl ans. Pressured by the financial upheaval and falling memory prices, Japan's big five IC manufacturers are either slashing capital investment this year or holding the line.

NEC Corp. reportedly has postponed by one year its plans to start a pilot fab this spring at its R&D facility in Sagamihara. Hitachi Ltd. and Mitsubishi indicated they would cut back on DRAM production.

The planned spending cuts at Fujitsu Ltd. are among the most severe--off 30 percent to 40 percent next fiscal year, from this fiscal year's $1.4 billion capital-spending outlay. Fujitsu will also postpone the construction of a 300-mm-wafer line at its Aizu fab.

Mitsubishi Electric Corp., which expects to lose money on semiconductors this year, is also slashing investment and postponing construction of a 300-mm fab, planned at its Kochi Works site.

Meanwhile, IC companies that primarily produce logic chips, such as ASICs and microprocessors, are more interested in shrinking their process technology and moving to copper interconne cts, which offer smaller die sizes, faster devices speeds and improved yields. Until DRAM makers spring for the initial investments in 300 mm, logic manufacturers are less likely to move forward, observers said.

Bright spots
Despite the doomsaying, rays of hope broke through at the big equipment show. Many observers said that even before the International Monetary Fund's pending bailout (see sidebar), South Korea's semiconductor industry is slowly emerging from the worst of the financial crisis.

"We know they will come back, because these companies really do have tremendous engineering talent," said David N.K. Wang, the Applied Materials Corp. executive in charge of Asia. "There really is no question they are going to get through this and be around for a long time. But for now, we have to figure out how to work with them on credit issues."

Last week, the Samsung group announced a restructuring that, while short on details, involves a plan to sell off major portions of the far-flung group.

Once the nation's debt restructuring is completed, Samsung plans to announce that it will concentrate on "three or four" core businesses: electronics (including telecommunications, computers, and semiconductors), finance and either heavy machinery (mainly ships and construction equipment) or automobiles and commercial vehicles. In semiconductors, non-memory (including merged DRAM with logic designs) will receive top priority, the spokesman said.

A U.S. investment bank has been asked to evaluate whether Samsung can afford to sustain its recent entry into the car business, which has consumed investments of about $2 billion over three years. Samsung has a technology-licensing agreement with Nissan Motor Corp.

The issue is important. Scott Foster, a Baring Securities analyst, said Samsung cannot expect to remain competitive in semiconductors if it undertakes the very heavy investments needed to mass-produce cars.

Neil Cutler, chairman of joint-venture company Johnson Matthey Hyesung (Seoul), said Sout h Korea differs from other troubled economies in Asia, such as Malaysia or Thailand, in the level of its technical strength. Hyundai's ability to manufacture cars and Samsung's expertise in cellular or semiconductor technology remain very high, he said, and the devalued won has made Korean exports attractive abroad.

"Once the companies focus on their core competencies and adjust their resource allocation, they will make a major comeback," Cutler said. There is nothing wrong with the industrial competitiveness of Korea.

"It is the other side of the balance sheet, how growth has been financed, that needs fixing."

--Additional reporting by Yoshiko Hara.

  Go To Previous Story

Go To Next Story  

Back to This Week's News