– HEI President, Kim Young-hwan Visits LG Semicon Headquarters
HEI received LG Semicon shares on July 7 in exchange of 1 trillion Won promissory note according to its equity transfer contract with LG Semicon. (The total due payment for the equity transfer was 2.56 trillion won.) Thus, LG Semicon will now be operated as a subsidiary of Hyundai Electronics. HEI CEO Kim Young-hwan will also assume the position of CEO of LG Semicon, together with Sun Byung-don, who is currently the vice president of LG Semicon. The U.S. Federal Trade Commission (FTC) and U.S. Justice Department recently decided that the merger between HEI and LG Semicon does not violate U.S. Fair Trade Laws. The European Union also made a similar ruling, thereby giving its approval for the merger. HEI is expecting the official launch of the new merged corporation to be in October this year. Until then, both HEI and LG Semicon will independently maintain their current operation policies, while immediately integrating such operations necessary to realize early synergy effects as research & development. Due diligence has been done since mid-June, presided by Chang, Dong-kook, senior executive vice president of HEI. The merger policies for the two companies and operation plans for the new merged company are being established by “Merger Implementation Team” led by Jeon, In-baik, executive vice president. The “Merger Implementation Team” will be operated by the members equally selected from both HEI and LG Semicon. The semiconductor merger between Hyundai and LG has been the biggest focus in the Korean business world, since the Korean government initiated plans for overall corporate restructuring. The merger has also gained much worldwide attention because of its potential to completely change the order of the global memory chip market. HEI president, Kim Young-hwan said about the merger, “The most important synergistic effects attainable from this semiconductor merger will come from the R&D field. If both companies can successfully combine their research workforce, then the newly merged company will become the best in the world in terms of memory chip development capacity.” In 1997 and 1998, HEI was chosen by IBM and Compaq as the world’s best DRAM company. HEI has developed and introduced the world’s smallest 256M SDRAM chip, the world’s fastest 128M SDRAM chip and the 16M/64M SD chip used for graphics, and it has succeeded in developing the world’s first 16 GIGA DRAM-level circuit. As HEI already possesses such world-class technology, it is easy to expect that its merger with LG Semicon will enable it to become one of the world’s best companies in terms of R&D capacity. Such reinforcements in R&D are also expected to lead to increases in profits. It is expected that the merger will accelerate the development and introduction of new products by 6~12 months, thereby enabling early market entry and high-priced sales of products. “Chip shrink” plans, which play an important role in saving initial costs, will also be reduced by 3~6 months, and will therefore help increase profits and improve cost competitiveness. Experts predict that the semiconductor market, which has been in recession since 1995, will start to improve this year and grow 10~20% each year until the year 2002. Therefore, the merged company between Hyundai and LG will most likely become the largest beneficiary of this future market boom, especially since the new company will be equipped with world-class technology and the world’s largest memory chip production capacity (producing 300,000 eight-inch wafers per month). In terms of production facility investment, each production line, starting from the 256M SDRAM chip and up, requires an investment of US$2.5 billion. Since the merger will prevent overlapping facility investments and the reduction of R&D and SG&A costs, a total cost cut of about $6 billion over 5 years is expected.
