(Yearender) S. Korea to keep upper hand in chips, LCDs in 2010

By Kim Young-gyo
SEOUL, Dec. 20 (Yonhap) -- Confidence is growing that South Korean technology
firms are leading the country's economic comeback, boosting the industry's profit
outlook for next year.
The technology sector bumped up South Korea's exports this year by taking
advantage of the weak local currency, caused by the financial crisis, and through
more aggressive marketing compared with their competitors.
The Korea Exchange (KRX), the main bourse operator, said earlier this month that
tech giant Samsung Electronics Co. reported exports worth 53.3 trillion won
(US$45.9 billion) between January and September this year.
Samsung was the largest exporter among South Korea's listed firms, with exports
growing 9.4 trillion won over the same period last year. The company's shares
jumped 71.18 percent on-year, according to the KRX.
Local rival LG Electronics Inc. came in at a distant but still impressive second,
exporting products and services worth 18.4 trillion won. Exports by LG Display
Co., 38-percent owned by LG Electronics, came to 13.5 trillion won.
LG Electronics and LG Display, each recording an increase of some 2 trillion won
in exports from a year earlier, saw their shares rise 55.75 percent and 65
percent, respectively, this year.
With the Korean won gaining substantial ground against the dollar on signs that
the economic recovery is strengthening, analysts are projecting that South Korean
tech companies will continue to hold the advantage over their competitors abroad.
A poll by financial information provider FnGuide Inc. pointed to revenue growth
for Samsung Electronics next year, with analysts expecting a total of 95.3
trillion won in 2010 -- up 7.91 percent from this year. Samsung will also likely
post a 53.5 percent rise in operating profit to 10 trillion won, they said.
"Samsung Electronics is expected to post the largest net profit since 2004 at 12
trillion won," said Ban Jong-wook, an analyst at Daeshin Securities Co.
"Samsung's dominance will be bolstered as the global chip industry is on a
recovery path."
The analysts also predicted operating profits for LG Display, the world's
second-largest liquid crystal display (LCD) maker after Samsung, to grow 38.99
percent.
The upbeat overall outlook comes as chip and LCD prices are beginning to
stabilize. According to Taiwan-based DRAMeXchange, the contract price for
1-gigabit double-data-rate-two (DDR2) 128Mx8 chips that run at 667 megahertz
stands at $2.38, unchanged since early November.
The price for 1-gigabit double-data-rate three (DDR3) 128Mx8 chips that run at
1,066 megahertz also remained flat at $2.25 for the six weeks to November,
according to the DRAMeXchange.
Contract prices, or the average cost of chips traded in large volumes between
suppliers and PC manufacturers, usually undergo a correction in the fourth
quarter, considered to be a slack season.
"The price stability of DRAM resulted from limited supply growth and
better-than-expected demand," said Lee Ka-keun, an analyst at IBK Securities.
Lee said demand has also been boosted by growing sales of personal computers with
the release of Microsoft's new Windows 7 operating system and new smartphones
with greater capacity.
"Considering the demand-supply mismatch, prices will be steady even in January,"
Lee said. "Strong prices in the low season are further fueling expectations that
the industry will pick up next year."
A shift from DDR2 to DDR3 will be one of the deciding factors for the price of
memory chips, analysts said. DDR refers to the memory interface, defining how
quickly data can move from main memory to the system to which it is attached.
DDR3 DRAM is theoretically twice as fast as DDR2 DRAM and reduces energy
consumption by 30 percent. It is widely expected to overtake DDR2 in the first
half of next year.
"Many memory chip makers are in the midst of gearing their production lines
toward the DDR3 chips, while Samsung and Hynix Semiconductor have already
prepared for stable production of those chips," said Kim Seung-ik, an analyist at
Kyobo Securities.
"South Korean chipmakers are expected to be the biggest beneficiaries of the shift."
Demand for personal computers is also impacting the price of LCDs, a recent
market report published by DisplaySearch showed.
Prices for large-sized LCD panels for notebooks and monitors were steady during
the first week of this month, bringing up expectations that they will hit bottom
by the end of the year.
The price for a 20-inch wide monitor panel stayed flat at $75 from the previous
month. The 21.5-inch wide panel price was also steady at $91.
The price of panels for notebook computers and monitors dropped 5 percent during
the same period last year, DisplaySearch said.
The market researcher attributed recent price stability to smaller display makers
cutting output for notebook and monitor panels, as prices were lower compared to
panels for TVs.
"Demand has stabilized. There was even a shortage of some panel products," said
Ahn Hyun-seung, head of the South Korean office of DisplaySearch. "The
possibility of rebound in the LCD panel price during the first quarter is not
remote."
CLSA Asia-Pacific Markets, one of Asia's largest investment banks, this month
raised its rating for LG Display while also lifting its earnings forecast for
Samsung Electronics, citing the deceleration in price declines for LCD panels.
"We had assumed that prices would fall about 10 percent in the fourth quarter and
a further 10 percent in the first quarter. The actual price decline for the
fourth quarter was about 5 percent," said CLSA analyst Matt Evans. "Given the
rapid deceleration in price declines seen in December, we now expect prices to
fall only another 5 percent."
"The end demand appears to be stronger than expected and (will) continue to
increase," he added.
Contributing to the favorable market mood, some 15 trillion won is slated for
investment in South Korea's LCD and chip industry next year. The Korea Display
Industry Association, which has member firms including LG Display, Samsung
Electronics and affiliate Samsung Mobile Display, said last month it will invest
at least 8.2 trillion won.
In October, the Korea Semiconductor Industry Association said South Korean
chipmakers such as Samsung and Hynix also plan to increase investment in the
long-term, with up to 7 trillion won earmarked for next year.
ygkim@yna.co.kr
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