Fri, Nov 19, 2010 page10

• Toshiba to close chip plant and outsource production

  • Bloomberg
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  Toshiba Corp, the world’s -second-largest maker of flash-memory chips, will shut one of its oldest plants ahead of schedule and outsource some semiconductor output, accelerating efforts to boost the unit’s profitability.

  Toshiba will shut its No. 2 plant in Yokkaichi, central Japan, by the end of next month and phase out low-end chips used in products such as memory sticks, Kiyoshi Kobayashi, president of the semiconductor division, said on Wednesday in an interview. Toshiba will also farm out production of so-called logic chips next year to cut costs at a business that’s “barely breaking even,” he said.

  The moves by Kobayashi, who took the helm at the semiconductor unit five months ago, are part of Toshiba’s efforts to focus on its main business of making chips that save photos and songs in smartphones including Apple Inc’s iPhone. Sales of flash memory will probably rise 25 percent to US$22.5 billion next year, according to researcher iSuppli Corp.

  

  Used Toshiba memory chips are seen at an electronics shop in Tokyo on Nov. 9. Japan’s Toshiba Corp stuck to its full-year operating profit forecast, keeping it below market expectations, citing concern about an increasingly murky economic outlook, despite brisk chip sales.

  PHOTO: REUTERS

  Toshiba’s fortunes rise and fall with those of its chip unit, a business the company forecasts will make up about 17 percent of revenue totaling ￥7 trillion (US$84 billion) this year. The chip business broke even last year after incurring a ￥280 billion operating loss in the previous year, when memory prices plunged 70 percent.

  Kobayashi said second-half prices of flash memory may fall more than the 10 percent forecast last week by Toshiba senior executive vice president Fumio Muraoka.

  Spot prices of benchmark flash chips have fallen 17 percent since last month, according to data from DRAMexchange.com.

  “Part of me thinks the numbers might not turn out in the way Muraoka presented them,” Kobayashi said at the company’s headquarters. “We’re in a tug-of-war with customers on prices.”

  About 1,000 employees who work at the No. 2 plant will be transferred to facilities in the same manufacturing site, including a facility under construction that’s set to open in the summer, the executive said.

  The Yokkaichi factory, which processes 8-inch (203mm) silicon wafers, was opened in 1996, when Toshiba was still producing memory chips for PCs.

  Toshiba will outsource the -production of next-generation system LSI chips, which are being jointly developed with IBM Corp, by as early as next fiscal year, Kobayashi said.

  System LSI chips, whose functions range from processing images for television screens to crunching data, will account for 30 percent of the ￥1.2 trillion in sales Toshiba forecasts from its chip business this year, the company said.
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