Hitachi Ltd will this year consign production of microprocessors and integrated circuits to United Microelectronics Corp and Episil Technologies Inc of Taiwan in a bid to reduce the money it spends on chip production and improve profitability.
For the fiscal year ending in March 2000, Japan's largest electronics maker will consign production of about 10 percent of its forecast chip-related sales to the two companies. That may increase to 30 percent depending on market conditions, said Tsuyoshi Miyata, a Hitachi spokesman.
UMC will produce microprocessors for use in cars and integrated circuits for printers and digital TVs. Episil will make integrated circuits for consumer electronics.
"This is the first time we will consign our chipmaking outside the company," Miyata says.
Hitachi's move comes as Taiwan's semiconductor manufacturers recover from last month's earthquake and power outage. Technology research firm Dataquest said their down-time may be prolonged by a shortage of replacement equipment.
Many chip fabricating plants, known as fabs, suffered damage to quartzware, equipment used in the manufacturing process.
Hitachi said last month it would form a joint venture with Fuji Electric Co in November to develop semiconductors used to control rail cars and power plant equipment.
The company posted a group net of loss of 339 billion yen for the year ended March 31 on sales of 7.98 trillion yen, down 5.2 percent. The company predicted earnings and sales will rebound this year, based on expectations the Japanese economy will recover and the company will succeed in cutting distribution and other costs substantially.
Last year, Hitachi's microchip and consumer electronics businesses both lost money for a second year, and sales shrank across the board as Japan's longest post-war recession constricted orders of nuclear power equipment, auto parts and industrial machinery.
Hitachi shares rose as much as 30 yen, or 2.6 percent, to 1,170.
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