Nippon Steel (5401) To Abandon Japanese Chip Production
TOKYO (Nikkei)-Nippon Steel Corp. decided Monday to withdraw fully from domestic production of semiconductors, company sources said.
To that end, the steelmaking giant will sell all the shares it holds in subsidiary Nippon Steel Semiconductor Corp. (6939) to the United Microelectronics Corp. (UMC) group, one of Taiwan's leading semiconductor makers, by the end of the year.
Nippon Steel currently holds 30,560 shares of Nippon Steel Semiconductor, or 56% of the unit's stock outstanding.
Nippon Steel appears to have reached an agreement with UMC under which the Taiwanese firm will also buy one of the subsidiary's two chip-production lines. Together, the shares and the line are expected to sell for an estimated 5 billion yen.
After selling that line to UMC and the second line to another company, either foreign or domestic, Nippon Steel will pull out of chip production in Japan.
In the current fiscal year through March 1999, Nippon Steel is expected to report an extraordinary loss of about 120 billion yen, mainly on the disposal of debts incurred by the subsidiary. As a result, the company will likely post a large net loss, not the 5-15 billion yen in net profit previously forecast.
Nippon Steel entered the semiconductor market fully in 1993 by purchasing a Minebea Co. (6479) subsidiary. Since then, however, prices on dynamic random-access memory chips (DRAMs) have declined. Nippon Steel Semiconductor has sustained substantial losses since fiscal 1996 and had 7 billion yen of liabilities in excess of assets in the fiscal year ended March 31.
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