By Cho Jin-seo
Staff Reporter
GIHEUNG, Gyeonggi Province _ Samsung Electronics said it will be able to meet its monthly production target of semiconductor chips despite Friday's power outage, but it will take around 40 days to fully verify the quality of the affected products.
The world's largest memory chipmaker reconfirmed that the financial loss from the incident will not exceed 40 billion won in any case, much lower than initial predictions from stock investors. The firm also said that it will be able to catch up with its original production schedule within this month by increasing production volume and tightening its quality inspection procedure.
``Many people are concerned about the aftermath of the accident, but let me put it this way - the third-quarter earnings will tell it all,'' Hwang Chang-gyu, president of Samsung's semiconductor division, said in a brief meeting with visiting reporters on Monday. ``I am sure that the quarterly result will exceed the market's expectations. Our customers are showing full confidence in us, too.''
Hwang said that he has sent e-mails to major customers of its memory chips such as Dell and Hewlett Packard on detailed production schedules, which they were satisfied with.
Despite such nonchalance from management, Samsung Electronics' shares lost 1 percent Monday after losing 3 percent Friday. Hynix Semiconductor, Samsung's chief rival, gained 0.67 percent, while the market index KOSPI fell 1.16 percent on the day.
Four memory chip lines 7, 8, 9, 14 and two non-memory chip lines 6 and S, were halted for as long as 22 hours between Friday and Saturday as electricity went out at the factory complex in Giheung, Gyeonggi Province, due to an overheated transformer unit.
Samsung reacted swiftly to fix the power unit and restarted all the lines by Saturday noon. But it has to wait for weeks to check whether production has reached normal levels since semiconductor wafers stay on a line for about 40 days while being processed, it said.
The firm also tried to convince investors and customers by opening its facilities, which are usually closed to outsiders for security reasons, to reporters en masse on Monday.
It was also the first time that the company has shown the inside of the cutting-edge S manufacturing line that processes 12-inch wafers, it said.
Green lights were blinking on every machine seen by reporters, indicating that the line was back to normal. Small boxes relentlessly carried semiconductor wafers around the fully automated factory with only a few workers seen attending.
When news of the power failure first broke on Friday, several stock analysts had predicted that lines would remain ineffective for weeks and the accident would cost Samsung as much as 700 billion won. Choi Chang-sik, executive vice president of the non-memory chip division, refuted the figure.
``I can't understand on what basis they made such evaluations. But if they have good knowledge about semiconductor manufacturing, I believe they will agree with our explanation.''
Choi also said the firm has launched an investigation to find out what caused the power outage and who should be blamed.
Samsung is covered by a one-year insurance policy with compensation of up to 5.5 trillion won ($6 billion) sold by Samsung Fire & Marine Insurance, for which it paid 85 billion won. But it hasn't decided whether to request the compensation because it will increase insurance premiums when the contract is renewed next year, a high-ranking official of the group's public relations office said.
The official also explained that it is not the first time that Samsung's semiconductor line has been halted by an accident. For example in 1987, he explained, a line was also stopped in an accident. But it cost the firm only around 700 million won as it was a minor producer at the time.
Most recently, there was a 15-second power failure in the Giheung complex last month, though the machines all continued to operate on emergency back-up power, said Choi, the executive VP.