All eyes are on Samsung Electronics semiconductor chief Hwang Chang-kyu after he surprised the industry last Friday with the decision to increase facilities investment this year by W1.4 trillion to W6.8 trillion (US$1=W918). The news comes after the company posted W1 trillion in operating profits in the third quarter despite unfavorable business conditions amid plunging D-Ram prices. Attention is particularly intense since rumor has it that forces within the Samsung group are trying to damage Hwang.
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Hwang Chang-kyu, head of Samsung Electronics¡¯ semiconductor division.
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¡ß A third big leap?
Hwang plans to spend the extra money on introducing a new process technology and establishing a production base for next-generation products. He reportedly wants to expand the memory business by engineering a breakthrough in the stagnant memory market. Hwang is credited with helping the business flourish by developing high value added products ahead of competitors whenever the market was in recession. In 1998, when the world memory market went into recession after the Windows 95 boom, he led the development of higher value-added D-RAMs to overcome the recession as the chief of the company¡¯s semiconductor research center. Mobile and graphic D-RAMs became the main sources of the company¡¯s profits.
In 2001 when the D-RAM market plunged in the wake of the dotcom bubble, Hwang staked the company¡¯s future on NAND Flash -- nonvolatile memory with the capability to store data when the power is turned off. He predicted the memory market for mobile devices would explode. A few years later, exactly as he predicted, the Flash market grew exponentially, and now the business takes up some 40 percent of the company¡¯s memory sales.
And now it is shrinking again. According to U.S. market research firm Gartner, the market increased from less than US$30 billion in 2001 to $61 billion in 2006. But Min Hoo-shik, executive director of Tempis Capital Management, said, ¡°Hwang probably needed to make another bold decision because the market is very likely to shrink again this year with the price falling.¡±
¡ß The chairman¡¯s trust
Samsung Electronics¡¯ semiconductor division is devoting itself to developing innovative products and improving productivity. It released solid state disk (SSD) products using Flash and introduced a new production process that has helped increase productivity by over 15 percent. Predicting that the future is in semiconductors combining memory and non-memory chips, it is also developing new non-memory products. This has drawn attention to the relationship between Samsung chairman Lee Kun-hee and Hwang. One company executive said, ¡°If Lee didn¡¯t trust Hwang, he wouldn¡¯t have approved the W1.6 trillion increase.¡±
The situation is similar to six years ago. When Japan¡¯s Toshiba, the then leader of the Flash market, suggested a joint venture with Samsung Electronics, Lee turned it down. Rumor has it that it was because he had confidence in Hwang, who believed he could do it on his own. And indeed, Samsung soon overtook Toshiba in the market and has led it for six years running.
(englishnews@chosun.com )
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