Seoul, Korea, October 19, 2000 – On October 14, Hyundai Electronics Industries Co., Ltd. celebrated the first anniversary of its merger with LG Semicon. Background of the Merger Starting in 1995, the semiconductor industry had suffered from over supply and price cuts resulting from increased production. Thus, the global market had become concentrated around a few large-scale companies. In response to that market situation, the merger with LG Semicon was orchestrated to ensure survival of Hyundai’s Semiconductor business unit and to facilitate its growth in the DRAM market. The Korean government and semiconductor industry leaders agreed to the restructuring in early 1998. The merger was finalized two years later when the newly merged company was launched on October 14, 2000. It was not easy to combine two companies that each had their own separate corporate cultures. However, there was a genuine effort on the part of both organizations to respect each other’s strengths and to foster harmony in the workplace. Prior to the merger, in July of 1999, Hyundai Electronics appointed Mr. Sang-Ho Park as president of the Semiconductor business unit. Previously with Hewlett-Packard and a former vice president of IBM, Mr. Park was chartered with establishing integrated management across the two different cultures. Since then, the Semiconductor business unit has greatly benefited from the synergy resulting from the merger. The business unit’s product development capacity has been strengthened and productivity has increased, along with a decrease in cost. Hyundai’s Semiconductor business unit is now poised to become the world’s leading semiconductor manufacturer. In addition, its “Better than the Best (BttB)” initiative is designed to foster innovation in corporate management, business systems, and culture. Synergy Resulting from the Merger Having attained 9th-place ranking for the first half of this year, Hyundai has secured its position as a leading player in the world semiconductor market. Prior to the merger, Hyundai’s DRAM market share was 11.9 percent and LG Semicon’s was 9.2 percent. However, the successful merger of two companies increased the monthly production capacity of 8-inch wafer from 150,000 pieces to 350,000 pieces, thereby boosting the combined market share to 23.3 percent. The lead time for product development has also been reduced by 6 to 12 months, thus improving time-to-market for next-generation semiconductor products. Results of the merger are as follows: – Sales for the third quarter of 2000 have increased by more than 70 percent, as compared to the same period of time last year – The company has diversified its product offering, thus decreasing its reliance on DRAM to 80 percent of total sales this year, down from more than 90 percent last year – Following the merger, a more stable customer base has been established with long-term contracts increasing from 50 percent to 80 percent of total sales for the business unit Hyundai is able to achieve an operating cash flow of more than US$ 4 billion from the sales of semiconductor products, which is expected to exceed US$ 7 billion yet this year. Therefore, Hyundai will be able to invest even more in technology development to promote continuous growth and to strengthen its competitive position. Strategy for the Semiconductor Business Unit Given Hyundai’s increased capacity and the growth of the semiconductor market, the mid and long-term strategy for the Semiconductor unit is to focus on core businesses in order to maximize profit and minimize risk. To this end, Hyundai will integrate product and technology development plans, thus converging its formerly separate research and development (R&D) staffs. The company will also balance its product portfolio to foster non-DRAM and non-memory businesses in order to build a stable sales structure and improve profitability. Mid and Long-term Vision Hyundai expects sales in the Semiconductor unit to exceed US$ 1.3 billion by 2003 when the strategies outlined above will be fully implemented. The company will then make an appropriate investment and repay its debt through the cash flow created by the sales. This is expected to improve Hyundai’s financial structure and increase its operating profit ratio by as much as 40 percent. Hyundai will also diversify its product portfolio to further reduce DRAM reliance down to 60 percent and to boost the ratio for non-DRAM and non-memory businesses to more than 30 percent. This will enable the company to increase its profitability while securing a balanced business structure. Restructuring and Future Vision Following the semiconductor merger, Hyundai has implemented the following series of restructuring steps, all designed to enhance its competitive strength: Since Dr. C.S. Park assumed the presidency last March, he has increased the number of outside directors on the board in order to achieve a more open style of management and financial structure. In addition, he vigorously pursued visits with overseas investors in Asia, Europe, and the US in order to attract their investments. As a result, Hyundai has succeeded in raising US$ 700 million this year by selling stock to overseas institutional investors. In order to more effectively concentrate on its three core businesses (Semiconductors, Telecommunications, and LCDs), earlier this year Hyundai spun off subsidiaries such as Hyundai Autonet, UPD, and Hyundai Image Quest. Through this series of restructuring efforts, Hyundai has reduced its debt to 9,400 billion Won (US$ 8.5 billion) at the end of last year, to 8,500 billion Won (US$ 7.7 billion) so far this year, and has plans to further reduce it to 7,700 billion Won (US$ 7 billion) by the end of this year. With its advanced management system and digital corporate culture, Hyundai endeavors to become “the best company to work for, the best company to invest in, and the best company to do business with.”
– Hyundai Electronics Industries Co., Ltd. celebrated the first anniversary of its merger with LG Semicon.
