Leading Japanese semiconductor manufacturers are scaling back production and capital spending plans, as a result of the fall in the price of computer chips and the economic slowdown in Japan.
Hitachi, one of the top five Japanese semiconductor makers, said it would cut production at eight of its domestic plants in an attempt to stem losses in its memory chip business.
The company plans to stop production for between four to seven days a week in February and March, cutting output by an estimated 20 per cent. The decision stems from a sharp downturn in the memory market which has resulted in the price of current generation 16-megabit dynamic random access memory chips plunging about 60 per cent since the beginning of last year.
However, Lucent Technologies and Singapore's Chartered Semiconductor Manufacturing say they are teaming up to build a $1 billion semiconductor wafer plant to make components for computing and communications equipment.
The plant will be the 10th such plant in Singapore and will employ about 800 people in the next two years. The plant, in Singapore's northern Woodlands suburb, is expected to produce 26,000 wafers a month.
The companies are among a few businesses that are making large investments in Asia amid the region's economic and currency crisis, banking on a recovery in the next few years.
Hitachi's move to suspend production is highly unusual in the semiconductor industry. Manufacturers generally try to keep facilities running as it takes considerable time to restart production.
Hitachi's move follows Mitsubishi Electric's plans to close one of its facilities in the US, where it manufactures lower value-added 4-megabit D-Rams. This is believed to be the first closure of an overseas semiconductor factory by a Japanese company.
Meanwhile, Fujitsu, another leading semiconductor maker and Japan's largest computer manufacturer, said it was considering reducing its capital investment by about 30 per cent.
Although a decision has yet to be announced, Fujitsu conceded that a reduction was possible. "Supply rose as a number of Taiwanese facilities came on stream and a concentrated [offensive] by Micron, the US company, meant that prices of 16-megabit D-Rams have fallen sharply," it says.
The weakness of D-Ram prices coincides with a downturn in Japanese PC shipments which has hurt demand for semiconductors. Japanese PC shipments fell nearly 8 per cent in the first half of the year.
Toshiba has also postponed the construction of an advanced facility in southern Japan. The original plan was for the new facility to start producing 256-megabit DRams in 2000. However, that plan had been delayed by at least two years, Toshiba says.
Meanwhile, NEC, the leading Japanese semiconductor maker, and second largest in the world after Intel of the US, is consolidating production of 16-megabit DRams at its US facility.
"We've got expensive equipment in Japan and Scotland and it's more rational to put them towards producing higher-valueadded products," NEC says. As a result, total D-Ram output will fall from about 11 million a month to about six million a month by this autumn.
Microsoft says it has cut prices of software products in some Asian countries to lessen the temptation of piracy against a background of the region's financial crisis. "We have changed our prices, otherwise it will stimulate piracy," says Mr Steve Ballmer, executive vice-president of sales and support. He declined to detail the reductions.
