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To: Proud_Infidel who wrote (32606)	9/24/1999 2:26:00 PM
From: Proud_Infidel	Respond to of 70976

Reorganized Hitachi targets high-end DRAM By Bolaji Ojo Electronic Buyers' News (09/24/99, 01:35:34 PM EDT) The decisions surrounding Hitachi Semiconductor (America) Inc.'s reorganization in the last nine months haven't been easy, but now the company's vision is clear. The DRAM division will concentrate on the high-end server and workstation markets, pass on the 128-Mbit monolithic SDRAM generation, and differentiate itself with its packaging and processing prowess. “What's our business? We're focused on the high end-that space is 256-Meg,” said Ron Bechtold, vice president and head of Hitachi Semiconductor's DRAM unit, in an interview. “We used to do everything, but now we're focused on the server and workstation market.” That assessment is shared by industry sources. “They've leapfrogged from where they were previously to a position where they could even be considered leaders in process technology today,” said Victor de Dios, an analyst at De Dios & Associates, Newark, Calif. “They've focused on the high end where prices have been more stable.” A year ago, Hitachi Semiconductor's options boiled down to this: Get out of the DRAM business completely or slim down, refocus, and become profitable-fast. In 1998, Hitachi's DRAM unit contributed a major chunk to Hitachi Semiconductor's $1.4 billion loss, which forced Japan's Hitachi Ltd., the parent company, to consider eliminating the DRAM operation from its $65 billion portfolio. The problem was not merely a lack of focus. The DRAM market was in flux last year, with average selling prices of components dropping precipitously. Hitachi Semiconductor took a major hit because about two-thirds of its DRAM sales went to PC OEMs, whereas the higher-margin server and workstation segment contributed only 10%. That has changed. The DRAM unit has been reorganized to lower production, distribution, and administrative costs and reduce its dependence on the low-margin PC segment. In addition, the company overhauled its inventory-management program and merged its U.S. DRAM operation with the Japanese branch as part of a move to lower delivery costs. “We've integrated inventory management, with 85% of shipments going directly to customers or remote warehouses,” Bechtold said. “We've taken about two weeks off inventory time. That's about 5% of the cost of sales.” The result of this reorganization was that by the end of second-quarter 1999, Hitachi's product mix had a different composition. High-end products had the upper hand with 60% of total sales, while the PC end of the business had shrunk to 21%. “We've made the transition from trying to survive to being a success,” Bechtold said. “We even managed to eke out some profit in the second quarter.” Hitachi Semiconductor, which is based in Brisbane, Calif., has also been struggling to differentiate itself through a cutting-edge packaging operation that's helped it introduce a batch of new products in the last few months, including stacking techniques used in tape-carrier and double-density packages. And earlier this month, Hitachi introduced the industry's first 512-Mbit SDRAM that puts 64 Mbytes into a single package. But the last chapter of Hitachi's DRAM saga has yet to be written, according to analysts. The final version may conclude with a dramatic denouement in which Hitachi and NEC Corp. combine their DRAM operations. The recovery of its DRAM unit helped pave the way for the linkup announced in June between Hitachi and Japan's NEC. The companies said they were thinking of establishing a joint-venture company to handle their DRAM development and design. The proposed subsidiary would also unite their DRAM products under a single brand. “Hitachi is behind in wafer investment, and the NEC deal could make it easier for them to raise investment, although they won't necessarily exit the [DRAM] business,” de Dios said. The logical conclusion of the arrangement with NEC is for the chip makers to float a new company, or for NEC to acquire Hitachi's DRAM operations, according to Sherry Garber, an analyst at Semico Research Corp., Phoenix. “It just seems to make an awful lot of sense that they should completely combine their operations if the recent tie-up with NEC is going to be successful,” Garber said.