Exclusive: Japanese DRAM makers to back off PC market
By Jack Robertson
Electronic Buyers' News
(06/17/99, 10:40:50 AM EDT)
Three Japanese DRAM makers-Fujitsu, Hitachi, and Mitsubishi-have confirmed that they are significantly reducing their exposure to the volatile PC-memory market and will redirect efforts toward applications in the high-end computing, consumer electronics, and communications sectors.
Weakened by years of downward pricing pressure in the commodity DRAM arena, the companies will now concentrate precious capital investment funds on development of application-specific DRAMs for non-PC markets-as well as fostering a broader focus that will include ASICs, flash-memory, microcontrollers, microprocessors, and other non-DRAM semiconductors.
Ryusuke Hoshikawa, executive vice president of Fujitsu Ltd.'s Semiconductor Group, told EBN in an interview this week that he hoped PC-related DRAMs "would be cut 80 to 90%" during the current fiscal year ending March 31, 2000. He said the company is rapidly shifting to non-PC memory chips, which now comprise more than 50% of all Fujitsu DRAM sales.
As a result, the company's DRAM production bit rate will decline next year, he said. The decrease didn't bother Hoshikawa, even in the face of exploding bit growth from rapidly advancing tier-one companies like Micron Technology, Samsung Electronics, and NEC.
Hideo Inayoshi, deputy general manager for strategic planning at Hitachi Ltd.'s Semiconductor and Integrated Circuits Division, said fewer than half of the company's DRAMs next year will be sold into desktop PCs. Hitachi's bit growth is expected to increase by not much more than 25%, significantly less than the 70% growth that has served as an historic industry average.
"We will focus on DRAMs and 256-megabyte modules for high end applications, such as servers and workstations, and 128-megabit DRAMs for notebooks," Inayoshi said.
Mitsubishi Electric Corp. said that while it will remain in the PC market, it will use its position to advance into other areas such as servers, workstations, and communications platforms, in addition to consumer electronics.
"[The PC] DRAM business is so risky, but DRAM technology is required in [system-level integration],” said Koichi Nagasawa, president of Mitsubishi's semiconductor group. “To stay in DRAMs, we need a certain amount of volume production." Mitsubishi hopes to achieve the necessary DRAM critical mass by shifting to consumer products like digital television, DVDs, and electronic games.
Nagasawa also saw embedded DRAMs growing rapidly in a wide range of consumer goods. Mitsubishi is counting heavily on its joint chip development program with Matsushita as a means to switch its DRAM focus away from the low-margin PC market. Nagasawa also said Mitsubishi will contribute embedded DRAM expertise that will be used by Matsushita in unspecified consumer electronics products.
In addition to diversifying into non-PC markets, the three Japanese chip firms are reigning in capital spending increases. In separate moves, the companies will stretch limited capital investment funds to upgrade existing fab lines to manufacture non-PC DRAMs.
Hitachi will hold its chip capital expenditures to about $580 million in the current fiscal year, roughly the same level as a year ago. Mitsubishi is planning about $375 million in new semiconductor capital spending this fiscal year, nearly unchanged from fiscal 1998. And Fujitsu is projecting a 30% decrease in spending this year to approximately $475 million.
The trio will continue to outsource DRAM production to offshore foundries as a major way to cut costs. According to Inayoshi, Hitachi is considering a resumption of DRAM outsourcing to LG Semicon, which is in the process of a merger with the chip division of Hyundai Electronics Industries Co. Ltd. LG had been a longtime DRAM contract manufacturer for Hitachi, supplying the company's customers with many as 2 million units a month. But outsourcing levels have “dropped to zero" as a result of the prolonged price pressure on the 8-Mbit x 8 PC100 and 66-MHz SDRAM that constitute a large portion of LG's production output, Inayoshi said.
Nagasawa said Mitsubishi will continue to outsource 45% to 50% of its total DRAM production to Powerchip Semiconductor Corp. of Taiwan. "We will transfer 0.18-micron process technology to Powerchip in the third quarter [of 1999]," he added.
Fujitsu's Hoshikawa, meanwhile, said the firm will continue outsourcing DRAMs, but he was less definite about which foundry it would use. "We may need to make some changes," he said without elaborating. Fujitsu is currently using Taiwan Semiconductor Manufacturing Co. Ltd. as its principal foundry, and according to a number of industry sources has signed with Acer Semiconductor Manufacturing Corp., both of Taiwan.
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