NEC Corp says it's reorganizing semiconductor operations overseas, while declining to comment on a report that it will cut half its workforce at a UK chip plant.
Japan's largest maker of computer-memory chips will cut its workforce at a semiconductor plant in Scotland by almost half, the Nikkan Kogyo newspaper said in its online edition, without citing sources. The UK plant, which employs 1,570, produces dynamic random access memory and other chips, the report said.
Tokyo-based NEC is "examining how to restructure" chip operations globally, spokesman Daniel Mathieson said, declining to comment on specific measures. Additional details may be given later this month, he added.
NEC said in May it will fire 700 employees, or 40 percent of the workforce, at a factory in Roseville, California, that produced DRAM chips, the main memory used in personal computers.
Prices have dropped below the cost to make memory chips for some chipmakers as clients use up extra inventory and buy fewer chips as economic growth slows.
"Getting out of DRAM operations overseas is good thing to do," said Scott Foster, an analyst at Lehman Brothers Japan Inc., who rates NEC "buy." NEC "should have done it sooner, but it's better late than never." NEC's shares rose ?34, or 2.2 percent, to ?1,590. The shares have fallen about 24 percent since the beginning of the year, compared with a 20 percent decline for rival Toshiba Corp and a 12 percent gain for Hitachi Ltd.
NEC, Japan's second-largest chipmaker behind Toshiba, is scrapping production of 64-megabit DRAM chips this year to focus on products with higher margins. The spot price of the PC100 64- megabit DRAM chip has fallen to less than a dollar, down from nearly US$9 a year ago.
"DRAMs are a commodity, and all commodities are cyclical," said Keon Han, an analyst with Bear Stearns Asia Ltd in Hong Kong. "When there are shortages, everyone jumps into production, and then there's a down cycle."
Other chipmakers in Asia are considering production cuts to reduce costs. Korea's Hynix Semiconductor Inc, the third-largest memory chipmaker, said last week it may cut output in an effort to boost chip prices. Toshiba will trim semiconductor production at four plants in the next two months to reduce costs.
Sales of memory chips are expected to drop by more than 40 percent this year, according to a recent forecast by market researcher IDC.
NEC will stop making DRAM at the UK factory by September, a year earlier than originally planned, the newspaper report said, adding the company will negotiate with its labor union in the UK.
The UK plant makes chips such as 128-megabit DRAM for PCs and also microchips used in cellular phones and camcorders, NEC spokesman Shinichi Kaede said.
Separately, NEC is suspending plans to invest ?20 billion (US$160 million) to boost production capacity at a DRAM plant in Shanghai, the report said.
The Shanghai plant produces 128-megabit DRAM.
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