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Mitsubishi bucks memory trend

Mitsubishi Electric will cut back on memory chip production in 1998, distancing itself from the coming transition to higher-capacity DRAMs.

Mitsubishi Electric will cut back on memory chip production in 1998, distancing itself from the vanguard of the transition to higher-capacity DRAMs.

The diverse electronics giant will decrease output at its Kumamoto and Fukuoka factories, particularly scaling back on next-generation, 64-megabit DRAM (dynamic random access memory) chips, a company executive told Japan's Nihon Keizai Shimbun. 64-megabit chips are expected to begin replacing 16-megabit chips toward the end of 1998 or early in 1999.

The computer industry relies on 16-megabit DRAMs to make up the memory modules found in today's desktop systems. 64-megabit chips can pack four times as much data onto a single chip, giving a standard-sized module four times the capacity. Currently, 64-megabit memory chips are used in pricier servers and workstations, but not standard PCs.

The transition will provide desktop buyers with vastly more memory capacity, but the shift won't take place just for customer convenience. Computer manufacturers buy memory on a cost-per-megabit basis, and have traditionally shifted to denser memory chips only when the more advanced product becomes four times or less expensive than the contemporary standard. Last fall, 64-megabit DRAM was on track to hit the 4X point in the third quarter, according to some analysts, although 16-megabit DRAM was dropping in price as well.

Most memory manufacturers are planning to increase 64-megabit chip production, according to reports from Japan and elsewhere. Mitsubishi is apparently moving in the opposite direction, cutting back to 1 million from 4 million units per month.

Like other memory makers, Mitsubishi has been hard hit by the hyper-competitive market, marked by a surplus and prices very near the cost of production. In the fiscal year ending in March, Mitsubishi will report a loss largely because of a 60 billion yen ($462 million) shortfall in its semiconductor division.

The company will return to profitability if it can hold its chips losses to 40 billion yen, Nihon Keizai Shimbun reported.