First, the overambitious investments themselves went sour. By early 1997, Alphatec had collapsed under its debts while its memory-chip plant was still under construction. Alphatec itself was only a small family-owned business with very limited experience in the semiconductor industry, and this lack of experience showed. Construction was plagued with delays: the plant was being built on land so marshy that concrete pilings had to be driven down to stabilize the buildings, at great cost. There was no clean water or power, both critical for chip manufacture, so Alphatec had to build the necessary
First, the overambitious investments themselves went sour. By early 1997, Alphatec had collapsed under its debts while its memory-chip plant was still under construction. Alphatec itself was only a small family-owned business with very limited experience in the semiconductor industry, and this lack of experience showed. Construction was plagued with delays: the plant was being built on land so marshy that concrete pilings had to be driven down to stabilize the buildings, at great cost. There was no clean water or power, both critical for chip manufacture, so Alphatec had to build the necessary facilities, adding further to costs. And even before high-tech plants like Alphatec's were completed, investors became concerned about their viability and started pulling out. The second trigger was the depreciation of the Japanese yen against the dollar, starting in 1995. This made Japanese exports far more competitive than exports from East Asia, where currencies were linked more closely to the dollar. Rather than sourcing from Thailand, with its uncertain quality and small pool of scientists and engineers, importers around the world now preferred to return to tried and tested Japan. East Asian exports started faltering, corporate profitability plummeted, and investment projects started closing down. Foreign investors started pulling out their money. Speculators joined the frenzy as they saw countries trying to defend exchange rates that were now distinctly overvalued. And as the c...
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east asian crisis: companies borrowed from foreign lenders via domestic banks (with implicit guarantee from govt) in foreign currency to fund crazy investment projects not overseen by govt. Prospects went south, local investors pulled out, especially as Yen dropped in value and Japan became cheap supplier again (at lower risk) to markets abroad. Borrowing companies failed, bank failed, govt tried to hold exchange rates fixed, depleting foreign reserves and eventually leading to default or resorting to IMF.
