Memory chip firms to cut back

Leading Japanese memory chip makers plan to cut back on production in coming months in response to continuing price drops, but the decision could be ill-timed.

NEC, Toshiba, and Mitsubishi Electric intend to reduce the number of 64-megabit DRAM (dynamic random access memory) chips they make in fiscal year 1999 by a total of about 28 percent, according to named and unnamed sources cited by the Nihon Keizai Shimbun, Japan's largest business daily. The goal is to reduce losses.

Citing figures showing that demand will catch up with and pass supply, however, one analyst said that recent steps to postpone new manufacturing facilities and cut back on production could produce a shortage by 2000.

NEC will cut its monthly output to 10 million chips from 15 million, while Toshiba will drop to 7 million from 10 million. Mitsubishi will reduce output to 4.5 million from a little less than 5 million, Nikkei said.

Meanwhile, although supply exceeded demand by 9 percent last year, that figure will drop to 2 percent this year and 1 percent next year, according to International Data Corporations's Japanese bureau. By 2000, demand will be ascendant, said IDC's Akira Minamikawa.

U.S.-based Micron Technology is apparently headed the other way, planning to boost production and also buy into KTI Semiconductor, a subsidiary of giant Kobe Steel. KTI too is expected to make more chips in coming years.

It is expected that the prices for 64-megabit DRAMs, now replacing 16-megabit chips as the standard, will continue to drop.