NEC Raises Output of 288 RDRAMs in Shift From
Commodity Chips
By Masumi Suga
Tokyo, July 11 (Bloomberg) -- NEC Corp., the world's fourth- largest maker of
memory chips, said it is boosting production of 288-megabit memory chips
using technology from U.S.-based Rambus Inc.
NEC said it will put into mass production 288-megabit direct Rambus dynamic
random access memory chips, or RDRAMs, which Rambus says transmit
data in personal computers faster than cheaper, widely used synchronous
DRAMS, the main memory for PCs. The faster chips are used in high-capacity
workstations that handle complex files such as graphics. NEC will hold steady
the monthly output of current 128-megabit chips, it said.
By switching its focus to Rambus chips with larger capacity, NEC may be
betting that 128-megabit RDRAM chips will not generate enough demand
among the current generation of personal computers and processors, while
hedging bets that it might well become the standard for future devices
requiring more muscle. Some analysts said NEC may have to wait for demand
to catch up with its plans.
The move shows NEC's ``eagerness to stick with Rambus chips as there's
still a possibility that demand will increase,'' said Yoshihide Otake, an analyst
at Tsubasa Securities Institute, who rates the stock ``average.'' ``NEC won't
see strong demand for the advanced Rambus DRAM for at least a couple of
years.''
Mountain View, California-based Rambus's chips are used in Sony Corp.'s
PlayStation 2 game consoles and in personal computers.
Shift in Focus
NEC denied an earlier report in the Nihon Keizai newspaper that it would stop
producing Rambus 128-megabit memory chips, saying it had no intention of
doing so and confirming that it had scrapped plans to increase production of
the chips.
The company is boosting production of the 288 chips as it sees
weaker-than-expected demand for the 128-megabit chips. NEC, which started
producing the 288-megabit chips in small test batches in June, will produce
150,000 units a month from September and expects to increase to 1.25
million units by March 2001.
The move comes as computer chip sales are expected to grow for the next
several years. The World Semiconductor Trade Statistics group predicts sales
of DRAMs will jump 37 percent this year to $28.4 billion, with sales growth to
average 21 percent between 1999 and 2003.
Samsung on Board
Samsung Electronics Co., the world's largest computer memory maker, is
committed to Rambus technology. The South Korean chipmaker said last
month it expects the market for chips based on Rambus Inc. technology to
grow tenfold in the next two years and will increase its own production to meet
demand.
Samsung, which said it makes 80 percent of the world's supply of the
128-megabit chips, forecasts RDRAM chips will represent 20 percent of its
memory chip production this year, rising to 40 percent by the end of 2001.
Rambus's technology, which the company says removes one of the main
bottlenecks in accelerating computers -- the speed with which the main
memory can receive data from the processor -- remains controversial.
Samsung forecasts the market for RDRAM chips to total $3.65 billion this
year and $38 billion by the end of 2002 though some analysts doubt Samsung
can meet those targets.
``In my opinion, that number will not be met as we don't see strong enough
market demand,'' said Keon Han, an electronics analyst at Bear Stearns &
Co. in Hong Kong, last month. Keun rates Samsung a ``buy.''
Backing from market leader Samsung is important for Rambus's aim to have
its technology accepted as the industry standard. PC makers have been slow
to introduce systems using RDRAM because of cost and some doubts about
the technology's effectiveness linger.
Capital Investment
NEC president Koji Nishigaki said last week that the company will spend an
additional 1 trillion yen on capital investment in the next three years, and 80
percent of that will be on semiconductors to strengthen its microchip
business. That compares with 260 billion yen invested in the year ended
March 31.
Brisk demand for microchips helped NEC post profit in the year and Nishigaki
expects it will continue to boost earnings.
NEC said in May it expects group net income to rise more than sevenfold to
75 billion yen in the year to March 2001 on sales of 5.3 trillion yen, up 6.3
percent from last year.
The company will maintain the current level of production of 128-megabit
RDRAM chips at 1 million units per month, it said. NEC had earlier planned to
boost monthly shipments of the chips to between 1.5 million and 2 million
units per month in September, it said.
NEC shares rose as much as 1.5 percent to 3,300 yen and closed up 1.2
percent to 3,290 yen.
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