DRam dip hits big chip vendors hard

Four Japanese semiconductor manufacturers see profits slide as drop in demand for memory makes prices go into freefall

The collapse in memory prices has taken its toll on Japanese semiconductor vendors after four companies saw their profits slump.

Japanese giants NEC, Fujitsu, Toshiba and Mitsubishi have seen their profits fall as prices of 16Mbit DRam took a nosedive last year.

According to Sukh Rayat, general manager of UK chip distributor Flashpoint, margins in the DRam-based memory market have been quite high over the years, but he admitted that supply is now ahead of demand.

The market for application-specific integrated circuits, however, has remained relatively buoyant.

Rayat also pointed out that the trend had affected revenues for the PC manufacturers which make up about 70 per cent of the market for DRam chips, but a number of vendors have compensated for the drop in revenue by diversifying into other areas.

In its results, Fujitsu said losses from semiconductors were offset by stronger sales of its communications equipment, and NEC said it had compensated for shortfalls through its telecoms business.

In the year to 31 March, NEC?s pre-tax profit fell by 24.8 per cent to Y121.2 billion from Y151.3 billion the previous year, and Fujitsu?s group net profit fell 26.9 per cent to Y46.1 billion. Toshiba also saw a 26 per cent fall to Y67.08 billion, while Mitsubishi recorded a group net profit of Y8.5 billion, down from Y59.2 for the same period last year.

The instability of the DRam market became clear last month when European commissioners imposed tariffs on Japanese and Korean chip vendors to prevent them from selling their products in Europe at less than cost price.

But observers believe this move by the EU to protect its chip manufacturers, after it was lobbied by the European Electronic Components Association, was too little too late (PC Dealer, 19 March).