Samsung to cut spending 35 percent


Samsung will cut spending on new factories by more than a third, as South Korea's chipmakers suffer a dire slump

By Alex Frew McMillan CNN Hong Kong

SEOUL, South Korea -- Samsung Electronics Co. will cut capital spending by more than a third next year, it said Monday.

Samsung, the world's biggest memory chipmaker, has set aside 3.05 trillion won ($2.4 billion) to spend on new plants and facilities in 2002.

That's a 35 percent drop from this year's "capex" budget of 4.7 trillion won ($3.7 billion).

A spokesman told CNN that Samsung was scaling back on factory spending because of the poor economic conditions. The industry is suffering through what it calls the worst downturn in the history of chipmaking.

Spending on high-end lines

"Instead of investing money on capex, we are more emphasized on how we can increase the profit structure during this recession period," public relations manager James Chung said.

Samsung will focus its capital spending on high-end chip lines only, he said, rather than its whole product range.

"We already invested certain amounts of money to build up the product lines … in strategically important fields," he said. "That's why we are reducing the capex overall."

Samsung has weathered the slump in chip prices better than rivals such as Seoul-based Hynix Semiconductor, which analysts say has less-efficient plants.

But both Korean companies, as well as their Japanese counterparts, have taken big hits to earnings. Samsung's third quarter net profit of 420 billion won was down 75 percent from last year.

No contact from Japan on dumping

Chung said Samsung has not heard from its Japanese rivals. Competitors such as Toshiba, Hitachi, NEC and Mitsubishi Electronic are reportedly considering filing suit against the Korean companies, whom they accuse of illegally dumping cut-price chips in Japan.

"We don't worry about those kind of rumors," Chung said. "If they do [contact us], I'm sure we could solve the problem through negotiations."

Chung said the antidumping lawsuit was being "recommended" by Japanese newspapers but the Japanese companies have not acted.

Prices of the Dynamic Random Access Memory chips that Samsung specializes in slumped from over $9 to less than $1 this year. But the price pressure has eased slightly in November, with DRAMs now fetching between $1.60 and $1.90.

Toshiba President Tadashi Okamura said in late October that the Japanese chipmakers would need to be "extremely cautious" in any dumping complaint and should avoid jumping to conclusions.

Samsung Electronics is the largest listing on the Seoul exchange. Its stock was trading up 4.3 percent in Monday's afternoon session, at 218,000 won.

That was ahead of the benchmark Kospi index, which was up 2.6 percent at 626.95 in early afternoon trading.