Toshiba to cut memory chip output by 25 per cent

In the face of what it describes as a "deepening global downturn" in the semiconductor sector, Toshiba plans to permanently close by September a memory chip production line at its Yokkaichi plant in western Japan, it said Wednesday.

The plant has two production lines which are jointly responsible for a monthly output of 70,000 eight-inch (20-centimeter) wafers per month. Closure of Line 1, which produces DRAM (dynamic random access memory) chips using a 0.2-micron process and SRAM (static random access memory) chips using a 0.4-micron process, will mean an approximate 50-percent cut in wafer output from Yokkaichi, said Kenichi Sugiyama, a company spokesman.

Line 1 at the plant is Toshiba's most out-of-date memory chip production line. The companion Line 2 at Yokkaichi produces a newer generation of chips using a 0.175-micron process, and Dominion Semiconductor Inc., the joint-venture memory production company formed by Toshiba and Sandisk Corp., is currently switching to a 0.175-micron process. A micron is one-thousandth of a millimeter, and the process figure refers to the smallest gap that can be created between circuits on the surface of the chip. With each advance in technology, chips can be made physically smaller and with improved performance.

There will be no job losses with the closure of the production line. Toshiba will transfer 230 employees over to Line 2, which will begin to operate multiple shifts, and 70 employees will be returned to Iwate Toshiba Electronics Co. Ltd. from where they were on loan, said Sugiyama. Toshiba said it plans to transfer equipment from Line 1 to Line 2 or sell it on the second-hand market.

The effect of the closure on Toshiba's total DRAM chip output will be a 25 percent drop, in 64M-bit equivalent terms, from September to October. Yokkaichi is expected to produce 11.5 million 64M-bit equivalent DRAMs in September, a number that will drop to 4.5 million in October. Total production, including chips made under contract at Taiwan's Winbond Electronics Corp., will drop from 27.0 million to 20.0 million 64M-bit equivalent chips.

Semiconductor makers around the world have been cutting back production, particularly that of DRAM and SRAM chips, as the world market slumps and prices continue to slide. The spot price for mass market 128M-bit DRAM chips was about US$5.35 at the beginning of the first quarter although this had slipped to about $4.80 at the beginning of the second quarter and had slid further still to $2 per chip when the quarter ended, according to information from memory market data provider ICIS-LOR. Yesterday the same chips were trading for around $1.60, said ICIS-LOR.

In response several Japanese chip makers including Toshiba scheduled longer summer holidays for their plants in the hope that a dip in production would help them burn up growing inventories of unsold chips. NEC Corp. has had enough of the highly cyclical market and announced recently that it plans to withdraw completely from memory chip production by 2004.

Despite the downturn, Toshiba plans semiconductor sector capital expenditure of 100 billion yen (US$800 million) in the current fiscal year, which ends in March 2002.

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