Chip-makers' investments likely to spread out pack.

Byline: From Bloomberg News and Register-Guard reports

SEOUL - Samsung Electronics Co., Intel Corp. and Texas Instruments Inc. will probably widen their lead over semiconductor rivals this year because they're investing the billions of dollars needed to compete in the $141 billion industry, investors and analysts say.

Heavy capital spending will help Samsung, the world's No. 1 maker of dynamic random access memory chips, beat out DRAM rivals Hynix Semiconductor Inc. and Boise-based Micron Technology Inc., analysts said.

Financially struggling Hynix owns a 700-employee memory-chip plant in west Eugene along with a half-dozen memory chip plants in South Korea.

Meanwhile, in the computer microprocessor segment of the semiconductor market, Intel is opening factories that produce more chips from each silicon wafer and cut production costs by as much as 30 percent to stay ahead of Advanced Micro Devices Inc., its closest competitor. DRAM chips and microprocessors are both used in computers, but microprocessors are a far more complex product.

``The chip industry is a high-stakes gamble that requires a lot of investment,'' said Takehiko Takachio, a senior portfolio manager at Kokusai Asset Management Co., which manages Japanese equities, including shares of chipmaker Toshiba Corp. ``Those that invest for the future will be the winners.''

The industry leaders have the cash reserves and credit lines that allow them to continue to spend heavily on capital projects. By contrast, financially beleaguered Hynix is having trouble making payments on its huge debt, let alone finding cash to pump into capital improvements.

Falling business spending and slowing global growth have cut sales of the personal computers and phone equipment that use 70 percent of the world's chips. Companies that invest now will be set to outsell their competitors as corporate technology spending and demand for advanced mobile phones revive chip sales later this year, analysts say.

New investments may help South Korea's Samsung extend its gains this year. The conglomerate's chip sales rose 30 percent last year to $8.17 billion, according to market researcher Dataquest Inc.

``Samsung has been an extraordinary exception in the chip industry when you look at profit levels and increasing market share,'' said Egbert Jan Nijmeijer, who helps manage shares, including Samsung, at Robeco Groep in Rotterdam, The Netherlands. ``Nothing is stopping Samsung from further building on its already strong position.''

Samsung invested $4.1 billion in new plants and equipment in 2002, more than four times its nearest memory-chip-making rival, Micron. Samsung says it has $5 billion cash and plans to start mass production by the third quarter at a plant that makes 12-inch wafers, up from the current industry standard of eight inches. With larger wafers, the chip maker can manufacture more chips per wafer.

Hynix, the world's No. 4 memory-chip maker according to iSuppli Corp., last year spent only about a 10th of what Samsung did on capital improvements. Hynix in early 2002 completed a $120 million upgrade of the Eugene plant to increase production of chips per wafer.

Saddled with debt estimated to be as high as $10 billion, Hynix will probably post a $920 million loss in 2003, its sixth annual loss in a row, according to Merrill Lynch & Co.

By contrast, Samsung's 2003 profit will probably rise to at least $6.8 billion from an estimated $6 billion last year, according to analysts surveyed by IBES. Samsung's shares rose 12 percent last year, while Hynix's slid 88 percent and Micron's shares dropped 68 percent.

In the segment of the market that makes chips for mobile phones and the like, the story is the same.

Texas Instruments, whose chips power half the world's mobile phones, invested $800 million in 2002, mostly to upgrade wafer-making equipment. That dwarfed the $180.5 million invested by National Semiconductor Corp., which also focuses on chips for wireless devices. In 2001, the industry's worst year ever, Texas Instruments invested $1.8 billion.

``We think we're further ahead in products and performance than we were during the height of the last upturn,'' Texas Instruments Chief Financial Officer Bill Aylesworth said. ``With our strong financial position, we knew we weren't jeopardizing the health of the company.''

The company had $2.59 billion in cash and marketable securities as of September, according to a filing with the Securities and Exchange Commission. By the same measure, National Semiconductor had $686 million in November.

``If you're ever going to make a big bet, this is the time to make it,'' said Cody Acree, an analyst at Legg Mason Wood Walker Inc., who rates Texas Instruments shares ``buy'' and said he doesn't own them. ``It's not really a huge risk to shareholders.''

Overall global chip sales will probably rise 12 percent this year to about $174 billion after gaining just 1.4 percent in 2002, according to market researcher Dataquest Inc. That still trails gains in 2000, when worldwide chip sales climbed 37 percent to a record $204 billion.

In 2000, capital spending on semiconductors surged 87 percent before falling for two straight years. Spending this year will probably rise 5 percent, according to IC Insights Inc.

``For 2003 as a whole I'm not very optimistic,'' said Nijmeijer at Robeco Groep.

CAPTION(S):

Bloomberg News Hynix Semiconductor Inc., with a plant in South Korea that is shown here, hasn't invested as much as its rivals.