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Memory chip glut takes toll in Japan

Japanese memory chip manufacturers are feeling the effects of a worldwide glut.

Japanese memory chip manufacturers are feeling the effects of a worldwide glut.

Pretax profits of the five largest producers are likely to decline because of anemic sales of Dynamic RAM (DRAM), according to the Nihon Keizai Shimbun, Japan's largest economic daily. The paper cited two companies in particular, Hitachi and Mitsubishi, which it said expect double-digit drops in earnings.

Other chip manufacturers, including NEC and Toshiba, are expected to report lower pretax profits. The companies had expected DRAM production to pick up again in June on demand from U.S. personal computer vendors, but that revitalization never materialized.

Some makers are taking drastic action to cope with the glut. Hitachi, which had originally planned to increase manufacturing, said it will temporarily close a production line for 16-megabit DRAMs at one of its plants and will cut overall production of the chips by about 10 percent.

NEC Corp. also said it has cut production of 16-megabit chip by 10 percent.