Memory of bad news

Kingston Technology cut prices up to 50 percent on memory chip-based products, which it sells for use in PCs, a sweet deal for users but one that underscores the growing crisis for Japanese chip manufacturers as prices plummet.

There have been "serious inventory problems for the DRAM and system manufacturers, causing the falling prices which have characterized the memory market this year," said Gary MacDonald, vice president of marketing at Kingston. The company takes the actual memory chips manufactured by Japanese and Korean companies and incorporates them into chip packages, or modules, that plug in to tiny slots inside a PC.

"This reduction is...made possible by the further decline in DRAM component prices used by Kingston to manufacture its memory modules," said the Fountain Valley, California-based company, one of the largest manufacturers of add-on memory modules for personal computers.

Although this is welcome news for consumers in the United States, Japanese memory chip manufacturers are reeling from the effects.

Toshiba will cut 10 billion yen from its 1996 consolidated capital investment in response to the sharp plunge in prices for 16-megabit DRAMs, according to today's Nihon Keizai Shimbun, Japan's largest business daily. NEC, Hitachi, and other major chip makers also plan to cut capital spending this term, "raising fears of adverse effects on related industries," the report said.

As evidence of the gravity of the situation, Toshiba will cancel purchases of production equipment originally slated for boosting 16-megabit DRAM production at two plants, the report said.

Moreover, pretax profit for Toshiba's semiconductor division is forecast to plunge 50 percent, compared to earlier projections of 30 percent to 40 percent, the paper said. NEC will likely cut 10 billion to 20 billion yen from capital investment, and Hitachi will do the same.