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Elpida to reduce semiconductor sales at spot prices

Elpida Memory Inc, Japan's largest computer memory-chip maker, will reduce the number of chips it sells on the spot market, following a new strategy by Hynix Semiconductor Inc.

Elpida can charge as much as 30 percent more by selling chips directly to customers, chief administrative officer Takehiro Fukuda said.

A glut of memory chips caused a 77 percent drop in spot prices this year, according to Taiwan-based Dramexchange (集邦科技), Asia's biggest semiconductor market.

"Our business model allows us to report a profit even amid severe price declines for memory used in personal computers," Fukuda said in an interview in Tokyo on Oct. 2.

He declined to say how much contract sales comprise of total revenue.

Tokyo-based Elpida and market leader Samsung Electronics Co are focusing on dynamic random access memory (DRAM) chips used in mobile phones, cameras and game consoles to bolster earnings. Hynix stopped spot sales last month and Sony Corp said it will form a venture with Infineon Technologies AG to cut costs.

"The spot market price is lower than contract prices because we're going into high season for the PC industry, and manufacturers have already secured their supplies," Roger Chu, an analyst at Dramexchange in Taipei, said by phone.

Elpida's operating profit, or sales minus the cost of goods sold and administrative expenses, will be more than the ?3.74 billion (US$32 million) for the first quarter ended on June 30, Fukuda said, without providing specific figures.

The company had an operating profit margin of 14 percent in the fiscal year ended on March 31.

Global orders for DRAM may outstrip supply this month, helped by seasonal demand and increasing sales of Microsoft Corp's Vista operating system software, which requires more memory, Fukuda said.

Sony, the world's second-largest consumer electronics maker, said on Wednesday it will design chips with Infineon to reduce development costs and make DRAM for faster data processing in cameras and mobile phones.

"Either Samsung or us will be affected, but not significantly," Fukuda said.

Elpida supplies DRAM chips for Sony's PlayStation game consoles and Bravia televisions, according to Fukuda, who was formerly chief financial officer. He declined to say how much business Sony has with the company.

In July, Elpida and Samsung separately said that increasing their reliance on high-end memory products allowed them to reduce the impact of falling DRAM prices.
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