Samsung Seeks Capital From Intel To Restructure

In the latest move to seek foreign capital, South Koreas Samsung Group said yesterday it was in talks with Intel Corp to improve operations of its semiconductor unit Samsung Electronics.

Samsung and Intel are discussing ways to expand mutual cooperation, said Cho Chang-won, a Samsung Group spokesman. Topics in the talks include a capital injection by Intel, a stable memory supply by Samsung and other options.

Other officials at Samsung Electronics said the talks with Intel, the worlds largest microprocessor manufacturer, were in the initial stages.

Later yesterday, the countrys second-ranked business conglomerate said Samsung Heavy Industries had agreed to spin off its forklift unit to Clark Material Handling Co of the US.

 

Samsung Heavy had also signed a letter of intent with Volvo Construction Equipment of Volvo AB to sell a majority of its construction equipment unit, the group said.

Earlier this week, Lim Kyung-choon, chairman of Samsung Motors Inc, said his companys negotiations with Ford Motor on a capital injection would be concluded before September.

Samsung needs to find a new way of doing business in a rapidly changing business environment, said Cho of Samsung.

Samsung officials said Intel already had a 10 percent stake in Samsung Austin (Texas) Semiconductor Inc, Samsung Electronics subsidiary in the United States.

Clark Material, the second largest forklift truck supplier in US, has had technical alliance with Samsung Heavy since 1984, they said.

Analysts said Samsungs recent move would affect the countrys other business conglomerates, which were under pressure to restructure.

Other sources for fresh capital are drying up as the countrys credibility has been shaken by the foreign exchange crisis, said Yi Seung-gook, the head of research at ABN AMRO Hoare Govett Asia. Capital injection by foreign firms seems to be the best way to bring down high levels of debts plaguing most South Korean companies.

On February 2, Daewoo Group, South Koreas fourth largest conglomerate and General Motors Corp tentatively agreed on a strategic alliance, which could include equity participation.

The two companies would fine-tune the formula on co-production and co-sales of vehicles for months to come, the group said.

But analysts said conglomerates, here called chaebol, were not biting the bullet as they were reluctant to get rid of unprofitable businesses.

For example, Samsung does not qualify to say it is restructuring hard until it gives up its car business, said Lee Jung-ja, the head of research at HSBC James Capel.

Analysts said Samsung was too proud to admit its investment in the car business was wrong. Instead, it was seeking a capital injection to stick to the sector increasingly suffering from global overcapacity.

I wonder what Ford can expect from Samsung in the car business. They cannot be equal partners, said Lee Hahn-koo, president of Daewoo Research Institute.

Samsung Motors launched its first line of cars this week after investing 2.7 trillion won ($1.59 billion) during the past three years to build a 240,000 unit-a-year capacity plant.

Analysts said Samsung entered the car industry when overcapacity problems began to accelerate. And relations with its technical partner Nissan Motor and capital requirements which were too burdensome had put Samsung in a predicament.