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It is expected that major semiconductor companies in Korea will cut their investment this year. Under the circumstances, industry experts are saying that the entire market will become stagnant as their investment reduction is likely to have its impact on their partner firms.
For instance, SK Hynix’s new capital expenditures for this year are estimated at below three trillion won, approximately 30% less than last year’s 3.85 trillion won. It invested a lot of capital in the construction of M12 lines in 2012 but is planning on no production line expansion this year. Most of the new investment for 2013 is going to be spent on the maintenance of its existing production lines.
In fact, the company made the announcement on as early as January 30 during its conference call for the fourth quarter of 2012. The move has to do with the recent memory semiconductor market conditions. Last year, the market recorded a negative growth due to the declining demand for PCs and it is likely to continue this year as well.
Samsung Electronics is expected to follow the same investment trend. It made a new investment of 14 trillion won last year, setting up system LSI lines in Austin, Texas. However, the company is planning to focus more on system semiconductor than memory semiconductor business. The purpose is to concentrate its investment on non-memory semiconductor business, which has a larger room for growth, than in the memory semiconductor market that it is already dominating. Though it announced investment plans in January for years, it has yet to make public that for this year.
With the two giants trying to be on the safe side, the semiconductor market is forecast to contract significantly. Second- and third-tier vendors and suppliers are predicted to show weaker performance, too. “As a matter of fact, partner firms’ business performance has deteriorated since the second half of last year due to SK Hynix’s and Samsung Electronics’ investment reduction,” said an industry insider, adding, “It is likely that things won’t get better this year as the two aren’t planning to increase their investment.”