NEC, the third-largest chipmaker, says it will halt production at its UK plant in April and fire all 1,260 employees after a decline in European demand for mobile phones.
The company, which forecast a full-year loss of ?80 billion at its chip unit, said it sees "no immediate sign of recovery in semiconductor market conditions."
Hitachi Ltd and Fujitsu Ltd also expect to post losses.
Hitachi said it will report a ?27 billion loss in the year ending March next year, half of which will be from memory chips.
Fujitsu expects a record loss of ?10 billion in the year ending March next year.
The shares of Toshiba and Fujitsu have declined by about half in the past year, while NEC shares have dropped more than a third. Hitachi fell almost a 10th in the period.
Mergers and Partnerships The industry's difficulties are forcing some memory-chip makers to seek partners.
Hynix Semiconductor Inc. of Korea and Winbond Electronics Corp (華邦電子) of Taiwan said they're interested in partnerships with rivals. Hynix, which is struggling to repay US$6.7 billion in debt and is falling behind competitors on upgrades of production equipment that help cut costs, has been in merger talks with Micron.
"If Hynix and Micron merge their DRAM operations, prices might stabilize," Shibata said.
Samsung Electronics Co, which has almost a third of the memory-chip market, will benefit the most as smaller rivals seek to combine to boost market share and gain economies of scale, investors said. The shares of Samsung have risen by almost three- fifths the past year.
Foundries, Designers Foundries such as TSMC won't start to make profits comparable to those in 2000 until the end of 2002, investors said. In the longer term, such chipmakers may benefit from a recovery in demand as companies like Schaumburg, Illinois-based Motorola Inc and Tokyo-based NEC, which closed or idled chip plants, farm out more production.
"We know the trend is in favor of the Taiwan foundry business," said Pedro Tai, who counts shares in TSMC among the US$180 million he helps manage at HSBC Asset Management Taiwan.
"But are you willing to pay a premium for the companies and wait two years for their recovery?" TSMC shares have risen more than two-fifths in the past year. UMC shares have gained by less than a fifth. The shares of Chartered rose 2.1 percent in the period.
Asian chip designers, which don't own factories, will be among the earliest gainers from a chip-industry recovery. They will benefit from lower prices for raw materials from foundries like TSMC, some investors said.
"Chip-design companies are more resilient in a downturn," said Tam at Baring Asset Management. "Quite a few good ones in Taiwan are benefiting from lower silicon wafer prices."
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