Japanese DRAM makers to back off PC market
A service of Semiconductor Business News, CMP Media Inc.
Story posted 11 a.m. EST/8 a.m., PST, 6/17/99
By Jack Robertson
TOKYO (ChipWire/EBN) -- 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 long-time 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-by-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. |
