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To: Richard Russell who wrote (28542)	2/17/1998 10:50:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 53903

Mitsubishi, Oki shift output to value-added chips By Yuzo Saeki TOKYO, Feb 17 (Reuters) - Japanese electronics firms Mitsubishi Electric Corp and Oki Electric Industry Co Ltd said on Tuesday they are pinning their future hopes for the computer chip business on more value-added chips. The move away from general-use dynamic random access memory (DRAM) chips comes at the time when major chip makers are suffering a sharp decline in earnings partly due to falling prices of DRAMs. Mitsubishi Electric said it is looking towards producing more custom-made products such as logic chips with built-in DRAMs. The company said, however, it would continue to develop 256-megabit or more advanced chips, which it said should be the base technology for such custom-made products. Mitsubishi Electric said it would meanwhile limit its spending for mass-production general-use DRAMs to a "minimal" level, but would continue to maintain a certain level of DRAM supply to its major clients. Earlier this month, Mitsubishi Electric revised its 1997/98 earnings forecast to a group pretax loss of 40 billion yen ($320 million) from the previous estimate of a profit of 35 billion yen ($280 million). It posted a 67.90 billion yen ($543 million) profit a year ago. In January, Oki Electric revised its 1997/98 earnings forecast to a group net loss of 8 billion yen ($64.0 million), compared with the previous forecast of a profit of 1 billion yen ($8.0 million). It posted a profit of 3.23 billion yen ($25.8 million) in 1996/97. Analysts said, however, that Mitsubishi Electric and Oki would not be able to significantly improve profitability through the new business moves. "(Mitsubishi Electric and Oki's) moves are not the perfect solution to their profitability problem," said Yoshiharu Izumi, an analyst at UBS Securities Ltd. He said that, while custom-made products have a higher profit margin than general-use ones, they are more difficult to sell in large quantities and thus are unlikely to boost overall sales. Analysts and company officials said the DRAM business requires a large amount of investment to keep up with the fast pace of change for higher capacity chips. Oki said it is shifting the focus of its semiconductor business away from DRAM chips and to large-scale integration (LSI) chips and logic IC (integrated circuit) chips. The company plans to reduce the weight of memory chips in its total semiconductor production to about one-third from the current half, while raising the combined weight of LSIs and logic chips to two-thirds, said an Oki spokesman. "We will continue research and development of 256 megabit DRAMs to produce the chips in the future," the spokesman said. But the spokesman said while the company would go ahead with a plan to build a factory, it would not be for the sole purpose of making next-generation 256 megabit chips. The company said in December it had stopped seeking new customers for its 16 and 64 megabit chips. The spokesman said that Oki's capital investment in its semiconductor business in 1998/99 will likely total around 20 billion yen ($160 million), down 40 percent from the current business year. ($1=125 yen)