Japan's chip makers put brakes on production

In the face of weakening demand and still plunging prices, many of Japan's major chip makers are using the upcoming Obon holiday period to idle plants for anywhere between two days and more than two weeks.

The holiday, during which many Japanese travel back to their home towns, serves as an annual barometer for the state of the industry. When demand is high and sales are good, the plants work right through the holiday, never pausing for breath, but when demand is poor and sales are low, chip makers idle their factories and give the workers the period off.

The longest break of all, among four major semiconductor makers surveyed, will be the 19-day holiday at Toshiba's Himeji factory, which produces semiconductors. NEC and Fujitsu will be taking breaks of 10 days and 3 days, respectively, at their plants producing logic chips and microcontrollers, due to weakness in demand, the companies said.

In the memory market, Fujitsu's low-end flash memory line in Saso will take a two-day break and the Gresham, Oregon, flash memory plant of Fujitsu AMD Semiconductor will see production scaled back from 60 percent of capacity to between 10 per cent and 20 per cent of capacity for an unspecified period. Mitsubishi Electric said it will stop production at its Kumamoto flash memory plant for 10 days, while Toshiba said it will reduce production at its memory plant by 30 per cent during a seven-day vacation starting July 28 and another vacation starting August 12.

It's not all bad news, however. NEC is not taking any break at the company's Hiroshima plant, which manufacturers DRAM for Elpida Memory, and its Yamagata and Kyushu plants, which are busy making chips for Nintendo's upcoming Gamecube home gaming console.

Japanese chip makers may also be cutting back on capital investment, according to a report in the Thursday morning edition of the Nihon Keizai Shimbun newspaper. The report said total capital expenditure (capex) by the country's five big chip makers is expected to be 550 billion yen ($US4.4 billion) in the current fiscal year, which ends in March 2002. That represents a 40 per cent drop from the previous year, said the newspaper.

None of the companies would confirm the report, although a spokesman for NEC, Daniel Mathieson, said, "NEC is looking at how to reduce expenses worldwide with the deterioration in the semiconductor market. We have not released any official figures (for current year capex) but we are examining options." The newspaper reported NEC is planning to cut its originally planned spending of 144 billion yen by 30 billion yen. An additional 20 billion yen of spending intended to boost production at a Shanghai joint venture will also be put off, and investment in boosting logic semiconductor production will be cut back, the report said.

Fujitsu is planning to cut between 20 billion and 30 billion yen from its planned expenditure of 190 billion yen, said the newspaper, and will freeze production increases planned for cell phone flash memory chips. "We haven't made any decision on whether we will change the 190 billion yen figure," said Bob Pomeroy, a spokesman for the company.

Mitsubishi Electric is also planning to cut spending by shaving 10 billion yen off its originally planned 80 billion yen investment, said the report. A spokesman for the company, Daniel Nicholson, dismissed the report as "completely speculative" and said "we are standing by our figure of 80 billion yen."

Some of the major chip makers are expected to reveal more details of their plans and the current state of their general and semiconductor business in the next two weeks when first-quarter earnings announcements are made. Such announcements are not compulsory in Japan, but NEC, Matsushita Electric Industrial and Sony are all scheduled to announce quarterly results.

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Martyn Williams

Computerworld

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