Toshiba selling U.S. subsidiary, reshaping chip business

Tuesday, December 18th 2001, 12:00 am

By: News On 6

TOKYO (AP) _ Struggling to regain profits, Japanese electronics company Toshiba Corp. is selling its U.S. chip manufacturing operation to Micron Technology and will stop producing DRAM chips.

The prices of DRAM or dynamic random access memory chips, which are standard memory chips used in personal computers, have plunged lately as competition heats up among the manufacturers.

Toshiba said Tuesday Dominion Semiconductor, a wholly owned subsidiary that makes DRAM chips in Manassas, Virginia, will be sold by the end of January. Micron Technology is the world's second-largest memory chipmaker.

``This transaction clearly demonstrates Micron's commitment to further strengthen its memory business in the face of a significant industry downturn,'' Micron Chief Executive Steve Appleton said in a statement.

Toshiba and other Japanese electronics makers have taken a severe beating from the global slump and diving chip prices.

Fujitsu has already pulled out of making DRAM chips. The only major DRAM production left among the Japanese makers is a joint venture between NEC Corp. and Hitachi.

Toshiba said it will focus on more profitable chips. It will phase out through next June its DRAM assembly operations at Yokkaichi, a Toshiba Electronics subsidiary in western Japan.

As a result of the tentative agreement with Micron, Toshiba said talks with German semiconductor maker Infineon Technologies have ended.

Infineon and Toshiba had been discussing a possible partnership in their chip businesses in a bid to ride out the industry's worst downturn. Prices for DRAM chips are well below production costs due to a glut of capacity and weak demand.

Last week, Infineon Chief Executive Ulrich Schumacher said the framework of a deal with Toshiba had been agreed in principle, but Infineon said Tuesday that none of the options turned out to be feasible.

Toshiba said it will cut costs by purchasing chips from other companies, including overseas assemblers, while maintaining its own core DRAM technology to develop more sophisticated chips, it said.

To speed up decision-making and respond better to market fluctuations, the Tokyo company will centralize its management, engineering and production control for its remaining chip business at the Yokkaichi plant.

Operations and facilities of Toshiba's flash-memory joint venture with SanDisk Corp., Flash Vision, now at the Dominion plant, will be moved to the Yokkaichi plant, the Tokyo-based company said.

Flash memory, used to store data in cell phones, digital cameras and other handheld devices, is a relatively more profitable chip operation than DRAM chips.

Toshiba recorded a 123 billion yen (dlrs 958 million) loss for the six months through September and expects to lose 200 billion yen (dlrs 1.6 billion) for the entire fiscal year. Toshiba is trying to return to profitability in its semiconductor business in the fiscal year ending in March 2003.