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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (37541)	9/27/2000 11:56:26 PM
From: Proud_Infidel	Respond to of 70976

Hitachi to subcontract more chip production TOKYO--Hitachi Ltd., Japan's third-largest chip maker, said that over the next two to three years it will double the percentage of its chips made by subcontractors. The goal is to cut costs and capital investment. It expects to contract as much as 20% of production to foundries, up from less than 10% now, Yasushi Akao, a Hitachi semiconductor department manager told Bloomberg News. The Japanese company aims to avoid over-investing in manufacturing at a time when some analysts are warning of a semiconductor glut as early as next year. But analysts question whether Hitachi's move will improve earnings. "It's essential [that] chipmakers build a good financial basis now to prepare for a bad business cycle,"' said Kazunori Kumata, an analyst at Sakura Friend Research Center Ltd. But subcontracting just 20% of production seems "too modest," he added. By focusing on manufacturing only, foundries can offer customers low production costs and a wide range of chip making technology. Hitachi's current foundries include United Microelectronics and Episil Semiconductors, both located in Taiwan, the company said. Some chipmakers, including Toshiba, have boosted outside production of DRAMs because they tend to be more vulnerable to price fluctuations. For example, the spot price of benchmark 64-megabit PC100 DRAMs has ranged between $4.70 and $20.90 during the past year. Worldwide sales of DRAMs are expected to peak at $75 billion in 2002 and fall until 2004, predicts Dataquest Inc. Sales will rise to $36 billion this year, up 80% from $20 billion last year, the market researcher said. Hitachi has equity relationships with its two Taiwanese foundries. In March, Hitachi and UMC established a joint venture in Japan, called Trecenti Technologies Inc. (see March 21 story). Hitachi spent $14 million for 60% of Trecenti, while UMC owns a 40% stake. In addition, Hitachi said early in September that it paid $9.11 million to acquire more shares in Episil. Trecenti will start production next year and focus on production of system chips, which combine memory and processing functions on a single piece of silicon.