Japan chip market slowing

Faced with slowing orders, Japan's largest semiconductor manufacturers will either delay the start-up of new production or shift production to more lucrative kinds of chips as new orders slow.

According to a report in Nihon Keizai Shimbun, Japan's largest business daily, top Japanese chipmakers are trimming ambitious production plans formulated during a two-year bull market.

Toshiba has decided to postponed starting a new semiconductor plant, in the face of sluggish demand, the report said.

The company has also decided to convert production lines in an existing plant from 16-megabit Dynamic RAMs (DRAMs) to chips used in telecommunications equipment, the report said. DRAMs, particularly the 16-megabit variety, have been battered by steeper-than-usual price drops over the last 12 months due to a supply glut.

Fujitsu has also delayed construction of a large semiconductor facility. Moreover, NEC may be planning to cut back on investment in new production capacity, the newspaper said.

Companies are making adjustments in the hopes of stemming a continuation of steep price declines for memory chips. These adjustments have already had some impact: Prices for computer memory chips used in add-in memory modules for personal computers have been creeping back up.

But there are dark clouds on the horizon. Orders for chip-making equipment, a barometer for chip production trends, fell in January, according to the newspaper.

January orders for semiconductor manufacturing equipment dropped 12.2% from the previous year to 60.29 billion yen, according to a report from the Semiconductor Equipment Association of Japan, the newspaper said.