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Monday, July 16, 2001
On Hardware

Toshiba to trim chip output
Edmund Klamann

TOSHIBA Corp, Japan's biggest chipmaker, said it will temporarily cut chip output this summer, giving the first public hint that the Japanese industry's scenario for a recovery later this year may be too optimistic.

"Demand is weakening and the market is soft," a Toshiba spokesman said.

He said it was unclear, however, whether the cuts would affect the company's production plans and earnings targets, announced in April, for the business year to next March.

Analysts said they expect more chipmakers to follow suit, reflecting sluggish demand for cell phones and other key semiconductor-using devices, which has hit the DRAM and flash memory markets hard.


"Id expect a lot of the chipmakers will do this," said Lehman Brothers analyst Scott Foster. "When Japan is in big trouble, they take long summer vacations."

The news follows several recent earnings forecasts from analysts indicating chipmakers will fall well short of semiconductor-related profit targets for the 2001/02 business year. The companies had assumed a chip market recovery in the second half.

Chipmakers such as Toshiba, Fujitsu Ltd and Mitsubishi Electric Corp that are major producers of DRAM dynamic random access memory and flash memory have seen their share prices tumble in recent weeks and extended those losses on Wednesday morning.

Fujitsu fell for a fourth consecutive session to its lowest intraday level since late 1998, ending the morning down 2.78 percent at 1,293 yen.

Flash falters

Analysts said the company will have to reconsider its plans for a two-thirds increase this year in flash memory production capacity, although a spokesman said no changes had been made.

Hitachi Ltd was the only gainer among Japan's five chipmaking conglomerates. Investors have been impressed by rapid growth in its data storage business.

Lehman's Foster said Toshiba appeared better positioned than some of the others to weather the downdraft, pointing to its brisk business making chips for Sony Corp's popular PlayStation2 game console.

He also noted that, while Fujitsu and Mitsubishi Electric are major producers of NOR flash memory for cellphones, Toshiba makes NAND flash memory used in digital cameras and MP3 audio players, which have remained relatively buoyant amid the current downturn.

Toshiba said its summer cutback plan would include closures of about two to three weeks for a transistor plant and a plant making commodity-grade integrated circuits.

Toshiba also said it plans a temporary 30 per cent output cut at a memory chip plant in Yokkaichi, central Japan, and will cut operating rates at its Oita plant, in southern Japan, which makes micro controllers for cell phones and consumer products.