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To: Keith A Walker who wrote (46655)	6/23/1999 6:50:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 53903

Jeff, That is consolidating, but given the large number of cos. in the business, not very important. The main thing is, nobody is consolidating to reduce production. And as long as the glut is here and getting worse, DRAM prices continue to head south. MB

To: Keith A Walker who wrote (46655)	6/24/1999 1:58:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 53903

FOCUS: NEC/Hitachi DRAM alliance positive but depends on smooth integration TOKYO (AFX-ASIA) - The plan by NEC Corp and Hitachi Ltd to combine their dynamic random access memory (DRAM) chip operations is a positive response to intense global competition but it remains to be seen how smoothly the two companies can integrate their activities, analysts said. They also said that while the alliance has the potential of becoming the global leader in the DRAM sector, the key in terms of profitability will be whether the two companies can create the right products. NEC and Hitachi shares both rose sharply in the morning session as the market responded positively to the fact that the two companies had decided to sacrifice own-brand independence for a stronger competitive position. NEC closed the session up 33 at 1,495 yen, while Hitachi gained 64 to 1, 103. Hitachi president Etsuhiko Shoyama said yesterday the two companies are aiming to capture at least 20 pct of the global DRAM market and jointly become one of the world's four leading suppliers. However, while the two plan to set up a joint venture responsible for design and development of DRAM products, there are no immediate plans to integrate production processes, although this has not been ruled out. NEC currenty holds 11 pct of the global DRAM market and Hitachi 6 pct. Their combined share of the local DRAM market is 33 pct. NEC president Koji Nishigaki said the integration of production activities "will take time, even if we were to agree to consolidate." Shoyama said the two companies hope to release their first single-brand DRAM product around autumn next year. ABN Amro Securities senior analyst Satoru Oyama said the planned alliance is "very positive", creating a competitive, specialist DRAM group in Japan and indicating "the two groups have become finally serious in restructuring their DRAM businesses at the expense of their own brands. "While such DRAM specialised producers as Micron Technology and Samsung can devote all resources, including cash flows, to development and production of DRAM technologies, such companies as Hitachi whose business categories are widely diversified cannot do the same. "No DRAM makers can survive stiffer competition as long as they do the business as a side job." ABN Amro however has not so far changed its 'neutral' rating on NEC and Hitachi due to a lack of information on strategy, output and financing. "Whether -- and how smoothly -- the two can integrate their production, sales and R&D activities are key to the success of their alliance," Oyama said. "These (changes) are not so easy." He noted that Hitachi had failed to make its alliance with Texas Instruments succeed, which illustrates the difficulty in fusing different corporate cultures into one. Wako Securities analyst Yuzuru Sato said the alliance will help the two companies cut costs in developing and manufacturing DRAM chips. "With their old conventional business style, they cannot compete" with Micron, Samsung Electronics or the Taiwan DRAM chip makers, he said. However, any tangible impact will take time to emerge, Sato said, adding that the companies first have to standardize their production lines. "For example, NEC's production lines are a mixture of DRAM chips and logic microchips," he said. Sakura Institute of Research senior analyst Shoichi Takashima said the NEC/Hitachi alliance has the potential of becoming the leading global player in DRAMs. However, without the integration of production activities, the venture will have little success in the global market, he added. Takashima noted some stumbling blocks, for example that "NEC and Hitachi source steppers from different makers." At present, NEC mainly buys steppers from Nikon, while Hitachi's supplier is Canon. Takashima said he is currently looking at upgrading SIR's '3', or neutral, rating for Hitachi and a '4', or underperform, for NEC. He added however that global DRAM makers generally will continue to face difficulties in maintaining earnings growth given redundant capacity and the fact there are still too many producers. "Unless these structural problems are resolved, no player can make profits," Takashima said. Universal Securities Research Institute analyst Motoharu Sone said it is premature to assess how much the alliance will improve NEC's and Hitachi's earnings from the DRAM sector. He said the key is whether the alliance is able to launch high added-value DRAM products which require advanced technology but generate higher profit margins. "In terms of production costs, Japanese makers will not be able to compete with foreign makers such as Samsung and Micron unless they compete with high added-value products" such as 256 megabit DRAMs, Sone said. NEC and Hitachi said yesterday they will start joint development initially on 256M DRAMs, using 0.15 micron processing technology. Sone said if NEC and Hitachi are able to launch 256M DRAMs using 0.15 micron technology ahead of other makers, then the alliance will benefit the two companies greatly.