Samsung to Close Old Lines
By Kim Yoo-chul
Staff Reporter
Samsung Electronics, the world's largest provider of computer memory chips, announced Thursday it will retire two of its older and more unprofitable manufacturing lines within the first quarter of next year.
The move aims to cut losses as the company braces for a prolonged industry downturn.
The decision by Samsung to abandon its six-inch, or 150-millimeter, wafer fabrication lines and focus production on its eight-inch and 12-inch wafer lines reflects a desperate attempt to improve the efficiency of its product lineup.
Samsung confirmed that "Line 3" and "Line 4," at its plant in Giheung, Gyeonggi Province, were the manufacturing lines to be shut down. The lines produced six-inch wafers for components used in digital cameras and other handheld consumer products.
"Yes, the decision is true ... equipment from the suspended lines will be sold either to local or foreign chipmakers, or perhaps used for local purposes," said a Samsung spokesman.
"Closing older lines doesn't mean that we are leaning toward cutting chip production. By increasing the production of more profitable chips, our capacity will be rather boosted," he said.
Samsung has been running the two six-inch lines for over two decades. The workers at the closed lines will be moved to other lines.
Shares of Samsung rose 2.54 percent to end 485,000 won on South Korea's main bourse.
Although the company is reluctant to reveal the details of future business plans, a company insider told The Korea Times that its was seriously considering an upgrade of its manufacturing lines to produce more eight-inch wafers.
Larger silicon wafers produce more chips per unit, which means better efficiency, capability in data processing, and lower manufacturing costs.
As the global memory chip industry has been reeling from an extended slump from sharp price falls and sluggish demand due to the global economic turmoil, leading chipmakers are scrambling to slash output and shutdown older, money-losing facilities.
Hynix Semiconductor, which trails Samsung in computer memory chips, closed outdated eight-inch wafer lines at its M7 plant in Icheon, Gyeonggi Province, and its M9 plant in Cheongju, North Chungcheong Province, September. The M9 facility had been producing NAND flash memory chips.
Meanwhile, Hynix also stopped the operation of its eight-inch chip fabrication plant in Eugene, U.S., in the face of growing competition with rivals which are adopting next-generation production facilities.
"The six-inch lines operated by Samsung are truly loss-making, therefore, the decision had widely been expected. But Samsung's move will strengthen its aim to transform some of the memory chip lines to non-memory chip production," a Samsung executive said, asking not to be identified.
The global semiconductor market, including NAND flash chip segments, remains weak in the second half with a normal seasonal boost evaporating as the global downturn hits demand for PCs and other consumer electronics.
Samsung said it will slash its investment in chips next year from this year's seven trillion won as there is no immediate sign for the memory market to turnaround. Hynix, which has been suffering from massive losses, also cut next year's investment target to a minimum one trillion won.