Sat, Jul 12, 2003 - Page 11 News List

Production may not be part of Fujitsu-Toshiba chip deal

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Fujitsu Ltd, Japan's biggest maker of business computers, may limit the scope of a chip partnership with rival Toshiba Corp, confining their cooperation to development in favor of making the chips at its own factory, an executive said.

"We've so far only cooperated on the basic technology to design system chips and there's a feeling that we can't extend our relationship further just now," Fujitsu chief financial officer Masamichi Ogura said in an interview in Tokyo.

Ogura's comment suggests Fujitsu expects only limited benefits from the partnership, one of several forged by Japanese chipmakers as the government encouraged them to band together to try to reclaim market share from overseas rivals.

Fujitsu and Toshiba, both based in Tokyo, embarked a year ago on a plan to jointly develop so-called system chips, which combine processor and memory functions onto a single piece of silicon.

"Fujitsu may be able to operate its chip business by itself," ING Securities Japan Ltd analyst Yoshihiro Shimada said.

"It's becoming aggressive in slashing the cost of developing system chips and in focusing on software and services," he said.

Fujitsu, whose shares have rallied more than 27 percent since June 24, will concentrate on making advanced system chips for computer servers, telecommunications equipment and cellphones at its factory in Akiruno on the western edge of Tokyo, Ogura said.

Should the company need to begin mass production, it could link up with a Taiwanese made-to-order chip company, Ogura said, without elaborating.

Fujitsu's shares fell Japanese Yen 37, or 6.3 percent, to Japanese Yen 548 in Tokyo Stock Exchange trade. Toshiba's shares fell 5.6 percent.

Fujitsu isn't excluding the possibility of cooperating with Toshiba or another Japanese partner in the future to produce system chips, Ogura said.

Even so, Fujitsu doesn't plan to invest in a factory Toshiba is building in Oita prefecture in southern Japan, he said.

"At the moment we haven't decided in which area we will work together with Fujitsu," Toshiba spokesman Makoto Yasuda said.

Building a factory with gear capable of cutting chips from 300mm silicon wafers can typically cost as much as US$2 billion.

Instead of a production partnership with Toshiba, Fujitsu may join forces with Renesas Technology Corp, analysts say.

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