NEC and Hitachi will do joint venture to cut chip costs. Jeff
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Tokyo, June 23 (Bloomberg) -- NEC Corp., Japan's largest
microchip-maker, and Hitachi Ltd. said they plan to set up a
joint venture by the end of the year to cut the cost of
developing and making future generations of computer memory
chips.
Hitachi, Japan's No. 3 chipmaker, and NEC may also unify
their production of dynamic random-access memory chips -- the
chips most commonly used as main memory in PCs -- under a single
brand, said NEC President Koji Nishigaki and Hitachi President
Etsuhiko Shoyama at a press conference.
Average prices of DRAM chips crashed by about two thirds in
the year ended March 31 thanks to global oversupply, contributing
heavily to record losses at NEC and Hitachi for the year.
''Reforming our DRAM business is part of our road to global
survival,'' said NEC's Nishigaki. ''We've had huge losses on
DRAMs, and the threat of falling DRAM prices is the biggest risk
factor for us.''
NEC and Hitachi gave no other details. Their announcement
follows a similar agreement in December between Toshiba Corp.,
Japan's second-largest chipmaker, and Fujitsu Ltd., the nation's
fourth largest.
Average prices of the most commonly used memory chips, 64-
megabit DRAMs, have plunged to about $5 from $10 in January as
Micron Technology Inc. of the U.S., Samsung Electronics Inc. of
South Korea, and others raised output.
Industry analysts say average 64-megabit DRAM prices could
fall as low as $4 in the July-September quarter as Micron and
others continue to flood the market.
NEC, also Japan's largest maker of PCs, lost a record 157.9
billion yen ($1.29 billion) in the year ended March 31 as
performance slumped at U.S. computer subsidiary Packard Bell NEC
Inc.
The world's second-largest chipmaker behind Intel Corp. of
the U.S. made a 52 billion yen loss for the year on its chip
business, which accounted for 18 percent of total sales.
NEC was forced to cut prices so much that chip sales fell 12
percent in the year, to 874.9 billion yen. The company hopes
higher sales of more sophisticated and profitable logic chips
will fuel a return to profit of 35 billion yen on its chip
business this year.
Hitachi, Japan's largest overall electronics maker, lost
money on chips a second straight year as it too cut prices.
The company reported a group net loss of 338.8 billion yen,
its first ever, as it lost money on microchips and household
electronics and took one-time charges to liquidate and merge
subsidiaries.
Toshiba and Fujitsu said in December they agreed to work
together to develop future generations of memory chips used in
PCs and digital consumer appliances. Toshiba and Fujitsu will
work to develop 1-gigabit dynamic random-access memory chips,
which will eventually replace the 64-megabit DRAMs currently in
mass production for use as the main memory in PCs.
NEC shares fell 32 yen to 1,462. Hitachi shares rose 4 yen
to 1,039. The companies released details of their alliance after
Japanese exchanges closed for the day.
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