By Kim Yoo-chul
Staff Reporter
Samsung Electronics, the world's biggest computer chip maker, plans to slash its investment in semiconductor chips by more than 50 percent this year.
Samsung is considering reducing its investment in semiconductor chips to two-three trillion won, sources told The Korea Times, Sunday.
The company invested 6.2 trillion won in chips in 2008, down from its earlier plan of seven trillion won, the sources said.
"As far as I know, Samsung will invest up to three trillion won in memory chips, this year," a high-ranking Samsung source said, asking not to be named.
"Overcapacity, rising inventories, slumping demand and a sharp fall in chip prices are forcing the company to slash investment."
However, the sources said a possible downsizing in chip investment doesn't necessarily mean Samsung has been changing its core strategies on the chip business.
Samsung has been aggressively investing in its key cash cows ― chips, flat-screens and handsets.
"We may lower the investment target for memory chips this year. But nothing has been decided yet so far," a Samsung spokesman said.
Earlier, Samsung's chief investor relations officer Chu Woo-sik said his personal view was that total investment will drop from 10 trillion to seven-eight trillion won in 2009.
Hynix Semiconductor has also trimmed its planned 2009 investment to around one trillion won, down from two trillion won as the company braces for the "worst time" in the first quarter of this year.
Analysts interpret the move as natural and say it will help the global chip industry see an early turnaround.
"Almost all chipmakers are suffering from huge losses. They don't have money. They want to secure as much cash (as possible) to brace for difficult times," said Kim Gee-soo, an analyst at Goodmorning Shinhan Securities.
"It's a reasonable scenario for Samsung to reduce investment and the decision is expected to add positive momentum to the global chip industry," said a foreign securities analyst who declined to be named.
Many memory chipmakers had expected demand for IT devices to pick up during the holiday shopping season. But the financial crisis has dampened consumer appetite for chip-embedded electronics devices.
Competition is at its most brutal in memory chips because production is standardized and chips are considered commodities.
Because 70 percent of their costs are fixed, there's little reason to cut back on production. So even as demand has fallen, leading chipmakers continue to dominate the market.
Hynix has cut its output of DRAM chips by 20-30 percent since late December, while Japan's Elpida postponed the start of DRAM production in China by one year to 2011.
"The key for an early turnaround in the global chip market is up to Samsung. No matter what the situation is, Samsung will lead the global chip market. But Samsung needs more flexibility as a long-term strategy," the foreign analyst said.