Korean IT Giants Facing `Survival Game'

From the semiconductor to flat screen sectors, where South Korea has been enjoying dominance over its overseas rivals, worries have arisen that the country might be lose its leadership.South Korea is the home of the world’s No. 1 and No. 2 memory chipmakers _ Samsung Electronics and Hynix Semiconductor. Samsung is also the world’s biggest liquid crystal display (LCD) television maker and panel supplier, while LG Display _ formerly LG.Philips LCD _ follows Samsung in the display sector by revenue.Industry experts have generally agreed that it is too early to say whether or not South Korean semiconductor and flat screen giants will soon fall victim to their Japanese and Taiwanese rivals, as the Korean players still have competitive technological advantages. However, they have not ruled out the ``worst case scenario’’ citing the industries’ consolidation moves across the globe.``I admit worries are unexpectedly high that our global share in the memory-implemented chip sector will decrease unless immediate measures are taken,’’ a high-ranking official from Samsung Electronics told The Korea Times Sunday.Samsung Group’s strategic planning team has been spending a considerable amount of time tackling the bribery scandal, resulting in the group’s flagship Samsung Electronics postponing this year’s detailed investment plans in the ``cash cow’’ semiconductor business.In contrast, the global DRAM chip industry is about to see ``fundamental change’’ as major players in the sector are looking for ways to reduce losses by adopting a more cost-effective manufacturing process. Last week, Taiwan-based Nanya and its U.S. partner Micron Technology agreed to set up a joint venture to develop a fine 50-nanometer level technology using the advanced ``stack’’ method (vertical expansion) as opposed to the unprofitable ``trench’’ system (horizontal expansion), an ambitious move by the Taiwanese player to survive in the current gloomy market situation.Moreover, Japan-based Elpida is reportedly seeking additional strategic partners including Micron to challenge Samsung.DRAM chips are used in PCs, and manufacturers have been suffering massive losses in recent years due to a supply glut, spurred by high expectation of Microsoft’s Windows Vista operating system.Even in the sector of profitable NAND flash chips, the world’s No. 2 Toshiba is set to expand production lines with its U.S. partner San Disk by 2009 after withdrawing from the HD-DVD business. NAND chips are used in high-end handheld gadgets such as MP3 players.``The DRAM industry is experiencing `consolidation’ as Toshiba wants to overtake Samsung. We have no time to waste,’’ another Samsung official said.Another Ominous Sign for LCDsAlong with the semiconductor sector, South Korean flat screen makers are facing serious challenges from their Japanese rivals, who want to regain the glory they enjoyed in the 1980s.Despite a strong edge in original technology, Japanese TV manufactures have failed to maintain their global leadership as they have been hesitant to invest massively, unlike Samsung Electronics.Recently, Sony, the world’s No. 2 LCD TV set maker, struck a deal with Sharp (rather than Samsung) to jointly construct an LCD plant producing next-generation over 60-inch panels. While Sony says the alliance is a part of a strategy to diversify procurement channels under the booming market situation, some experts claim that the move is a bid to overcome Samsung by riding on the South Korean rivals’ bribery woes.Samsung and Sony have operated a joint venture in South Korea called ``S-LCD’’ since 2004 to produce LCDs used in their own flat-screen televisions. To make matters worse, Japan’s Panasonic, the world’s No. 1 plasma display supplier, announced that it will end the production of display and expects to expand into LCD TVs through a capital business partnership with Sharp.``It is likely that Samsung will plunge after its Japanese rivals in the next-generation LCD business from 2010 as Sharp will produce so-called `10th generation’ panels with strong price competitiveness,’’ an industry source said.``This might affect Samsung’s television business,’’ the source added.No Cooperative Sign?Despite mounting worries, it seems unlikely that South Korean flat screen and semiconductor makers will strengthen ``constructive’’ partnerships with each other.Last Friday, Hwang Chang-gyu, president of Samsung Electronics Semiconductor Business, voiced opposition to Hynix Semiconductor’s proposed technology transfer to Taiwan’s ProMOS by saying the plan to transfer the fine 54-nanometer technology to ProMOS was a ``technology leak.’’``It is difficult to understand Hynix’ move,’’ he told reporters at a Seoul hotel.``Business is business. It seems unlikely both companies will widen a partnership in core sectors,’’ said another industry source.Late last year, Samsung and Toshiba reached an agreement to cross-license interface specifications and trademarks for their NAND flash memory chips, making Hynix feel uneasy about who was eyeing the high-end chip sector to offset falling profits from volatile DRAM chips.However, positive signs have emerged between local players in the LCD sector since LG.Philips Chief Executive Kwon Young-soo said that his company has engaged in talks with Samsung Electronics to supply its distinctive 37-inch panel. ``Korean players need to maintain a healthy partnership with each other,’’ Kwon told reporters after the annual shareholders’ meeting at the company’s LCD complex in northern Seoul.