Hitachi Ltd, which expects a loss of ?230 billion (US$1.7 billion) this fiscal year, said it will begin retreating from the mobile-phone memory-chip market to avoid competition with US-based Micron Technology Inc.
Japan's third-largest chipmaker will cut its workforce involved in developing flash-memory and static random-access memory chips, Hideo Inayoshi, a senior manager at Hitachi's chip business, said in an interview. Hitachi will focus on system LSI chips and microprocessors for consumer appliances and cars.
"This is a step in the right direction for Hitachi," said Sadaharu Nagumo, who helps manage assets, including Hitachi shares, at Japan Investment Trust Management Co. "They have a mountain of businesses and they're right to exit some and narrow their focus."
Like the other Japanese chipmakers, Hitachi is retreating from the computer-memory chip business after prices last year fell below the cost of production. Hitachi, whose mobile-phone memory-chip business is also unprofitable, is farming out production of dynamic random-access memory chips to a joint venture with NEC Corp, Japan's second-largest chipmaker.
Though Hitachi won't devote new resources to mobile-phone memory-chips, it won't abandon the market completely. The Tokyo-based company will produce an unspecified number of flash-memory and SRAM chips for its customers in the future, it said.
"Even if demand recovers, we can't compete with giants like Micron Technology, which is said to be launching production of flash memory soon," Inayoshi said. Boise, Idaho-based Micron Technology is the second-biggest maker of computer-memory chips.
The company is in the process of cutting an additional 4,000 workers by June through early retirement, bringing total job cuts to 6 percent of its workforce.
Hitachi expects a loss of ?127 billion at its semiconductor business in the twelve months to March 31. Hitachi's chip division will focus on non-memory chips such as wireless communications chips for Nokia Oyj's mobile phones and microprocessors for Nissan Motor Co engines, Inayoshi said.
The company will shift engineers involved in flash memory and SRAM chips to the development of microprocessors, Inayoshi said.
Microprocessors are used to calculate and process data.
Chips account for about 6 percent of Hitachi's sales. For the full year, Hitachi expects mobile-phone memory chips to account for one-eighth of its loss on an operating basis.
"The share of memory chips in relation to total chip sales will be less than 10 percent in the twelve months to March 2004, down from an estimated share this fiscal year of 20 percent," Inayoshi said.
Half of all SRAM chips produced by Hitachi are used in the company's own mobile phones. The company's bid to make inroads in Japan's handset market has stumbled because it failed to tie up with NTT DoCoMo Inc, Japan's No. 1 cell-phone operator.
Hitachi supplies most of its phones to KDDI Corp, Japan's second-biggest mobile-phone operator. KDDI is losing market share to rivals DoCoMo and Vodafone Group Plc's J-Phone Ltd.
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