Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Alliance Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: DJBEINO who wrote (2375)	1/20/1998 9:54:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

FOCUS: Japan chipmakers earnings to turn positive in yr to March 1999 AFX, Tuesday, January 20, 1998 at 05:36 ---- by Hiroshi Suzuki ---- TOKYO (AFX-ASIA) - Japanese chipmakers are likely to see their business return to profit in the year to March 1999, reversing the expected losses for the current year to March as the current DRAM oversupply eases and the industry moves up the techonological scale to 64M chips, analysts said. The turnaround should materialise as South Korean and Japanese 16M DRAM makers cut production amid a sustained downturn in prices. Earlier this week Hitachi Ltd said it may suspend operations of eight domestic microchip plants by up to two weeks in February and March, marking its first such production cut in six years. Hitachi said it may cut 16M DRAM chip output to around 8.0 mln units a month by the end of March against initial plans to produce 9.0 mln. Similarly, NEC Corp said it is to defer the start-up of new 300-millimetre wafer lines at its two microchip plants in Kanagawa and Kumamoto prefectures. Mitsubishi Electric Corp unit Mitsubishi Semiconductor America Inc has said it is to close its microchip wafer fabrication plant in the U.S. effective March 16 while the group has forecast an earnings downturn this term, due largely to the weak microchip market. For its part, when downgrading its year to March profit forecast, Toshiba said earnings are being pressured by weak microchip prices, although this division will continue to trade profitably. Moves to curb production are intended to "speed up" the shift to 64M DRAM from 16M chips, said Richard Kaye, analyst at Merrill Lynch. Although the microchip divisions of the big Japanese companies are mostly losing money due to 16M chip price falls, the spot price for 64M chips is expected to rise to above the break-even point from the current 18 usd a unit, Kaye said. "20 usd is regarded as the break-even point," Kaye said, adding that the 64M chip spot price is expected to rise to 25-30 usd in the June quarter. The smooth transition to 64M DRAM is expected to enable most Japanese manufacturers to generate profits from their chip divisions in the year to March 1999, said Akihiro Tsunoda, analyst at Kokusai Securities. The exception is likely to be Hitachi Ltd which may see losses continue in the year to March 1999 as it is lagging in the move to 64M, he said. "NEC Corp is maintaining profits in its (microchip) operations now and is expected to continue to do so in the year to March 1999," Tsunoda said. "Toshiba's and Fujitsu's year to March 1999 earnings in this division will turn profitable and so will Mitsubishi's," he said, barring changes in market conditions. At the same time, these companies are not expected to be able to generate profits from 16M DRAMS despite the recent recovery in the spot price, analyst said. Spot prices of 16M DRAMs are seen as having bottomed in recent weeks and should hold around the current 4 usd in the near term, or perhaps rise a little, after having touched 2 usd last week. ING Baring Securities analyst Peter Wolf said 16M DRAM prices will be "sustainable" at current levels and they may move "above the break even level" of Japanese microchip makers, especially now that South Korean microchip makers have "no reasons to dump" product, as they did last year. UBS Securities analyst Yoshiharu Izumi said each microchip maker is losing about 15-20 bln yen a month on 16M DRAM chips and it is "unlikely" they can generate profits in DRAM chip production "over the next six months" until the transition to 64M production is complete. "So the move of these companies to cut, or suspend, 16M DRAM chip production is aimed at improving market conditions for 64M chips. "Either continuing to produce 16M chips or stopping production results in losses. They opted stop production, which is good for the microchip market." Underpinning optimism for a strengthening of 64M DRAM prices in the coming months is widespread expectations of rising demand, analysts said. Merrill Lynch's Kaye cites expected strong demand growth in coming months on the back of good current sales of personal computers with the launch of the Pentium II chip and the scheduled launch of Windows 98 software. "Demand (for DRAM chips) is expected to rise more than 50 pct in the next fiscal year," Kaye said. Kokusai Securities Tsunoda said 16M DRAM shipments worldwide rose to 215 mln units in September from 176 mln in August and 170 mln units in July "as Korean chip makers tried to obtain foreign currencies." This trend is now expected to be reversed as they seek to rebuild margins and so stop dumping, he added. At the same time, Japanese chip makers are shifting production priority to 0.20 micron-based chips from conventional 0.25, Wako Economic Research Institute analyst Shimada said. "Korean makers will be left behind" as they have been forced to cut capital spending, Shimada said. Toshiba is expected to launch mass production of 0.20 micron-based 16M DRAM chips in the fourth quarter to December, with NEC expected to launch mass production in the first quarter to March 1999, he said.