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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Fabeyes who wrote (45720)	5/10/1999 8:56:00 PM
From: DJBEINO	Read Replies (3) \| Respond to of 53903

Japan's Chipmakers to Suffer From Sliding Memory Chip Prices Bloomberg News May 10, 1999, 5:28 p.m. PT Japan's Chipmakers to Suffer From Sliding Memory Chip Prices Tokyo, May 11 (Bloomberg) -- Japan's five largest chipmakers may be unable to regain profitability this year because prices of the memory chips most commonly used in personal computers are falling again. The five -- NEC Corp., Toshiba Corp., Hitachi Ltd., Fujitsu Ltd. and Mitsubishi Electric Corp. -- either lost money or broke even on their chip businesses the last two fiscal years because of losses on memory chips. Production cuts by Samsung Electronics Co. of South Korea, the No. 1 memory maker, allowed Japanese makers to hold prices stable from last September through January. Yet increases in production capacity by No. 2 maker Micron Technology Inc. of the U.S. and Taiwanese makers have pushed prices down about 20 percent in two months, threatening Japanese hopes of recovery in the year ending March 31, 2000. ''We had thought Japan's chipmakers would be able to make some money on DRAMs this fiscal year, but the issue's basically already settled,'' said Yohei Kanazawa, a senior analyst at Daiwa Institute of Research Ltd. Average spot prices, or prices for immediate delivery, for the 64-megabit synchronous dynamic random-access memory chips used as main memory in PCs, have fallen as low as $6.90 a chip after stabilizing at about $10 for the first six weeks of the year, analysts said. That hurts Japanese chipmakers because their costs are higher than those of Boise, Idaho-based Micron and Taiwanese third-party chipmakers such as Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. Taiwan's Costs Lower Daiwa Research's Kanazawa estimates it costs Japanese makers between $8.50 and $9 to make each 64-megabit DRAM chip, compared to between $6.50 and $7 for Micron. ''Once we go through $7, the very best the Japanese makers will be able to hope for is break-even, however much they succeed in cutting costs,'' said Daiwa's Kanazawa. Taiwanese makers' costs are even lower, at about $5.50 a chip, adding to the pressure on Japanese companies, said Satoru Ohyama, a senior analyst at ABN AMRO Securities (Japan) Ltd. TSMC and UMC are the world's two largest foundry chipmakers, companies that work on contract for other companies and don't sell chips under their own brand names. Their emphasis on high production efficiency and yields is helping them win more orders from Motorola Inc. of the U.S., the world's No. 3 chipmaker, and others. ''There's no way the Japanese makers can compete on costs,'' Ohyama said. ''Prices keep falling and falling, and we're stuck at the mercy of the market,'' said Aston Bridgman, a spokesman for NEC, Japan's largest maker of microchips and personal computers. ''It'll be difficult'' for Tokyo-based NEC's chip business to make money in the year to March 2000, Bridgman said. ''It shouldn't be a hideous loss,'' though, because NEC sells ''about 99 percent'' of its DRAM chips at prearranged contract prices rather than on the spot market, Bridgman said. Shares in Japan's largest chipmakers retreated yesterday on concern the renewed slide in DRAM prices will crimp their earnings. NEC shares fell 16 yen to 1,400. Shares in Toshiba, Japan's second-largest chipmaker, fell 3 yen to 797. Fujitsu, the nation's No. 4 chipmaker, lost 15 yen to 2,000.