TOKYO While continuing to struggle with intense price pressure for commodity products, Japan's electronics companies got a much needed boost as sales of semiconductors and digital consumer electronics devices started to surge during the first half of the year.
The uptick in orders for products such as logic, discretes, microcontrollers and flash memory have prompted Japan's major chip makers to scrap or scale back early plans to temporarily shut down their fabs as they have in recent years during the summer holiday season next month.
Mitsubishi Electric said it has cancelled plans for summer production line stoppages at its three main semiconductor factories in Kumamoto, Saijo and Kochi. Original plans had called for nine to 10-day closings at the plants in mid-August, according to Mitsubishi.
Current plans call for the factories to continue full production runs throughout the summer months in order to help Mitsubishi respond to strong demand for products such as flash memory and microcontrollers, the company said in a statement.
Koichi Nagasawa, president of Mitsubishi's semiconductor group, said at a company press conference earlier this week that "the semiconductor industry became active since the beginning of this year. The price situation of memory is still harsh, but as a whole, the market will grow by about 10 percent compared to the year before. The growth of system-on-chip is especially conspicuous."
Toshiba Corp., which has shut down certain plants for up to 10 days during the summer vacation season if demand is slow, said it too will keep its factories humming. "This year not only logic but bipolar and discrete [sales] are picking up, so we are planning to operate the factories even during summer vacation," a spokesman said. "Especially with bipolar and discrete, most of the sales go to Asia, and the Asian economy is now on its way to recovery compared to last year, so we're able to get more orders."
Toshiba's contract with Sony Computer Entertainment to produce 128-bit Emotion Engine CPU for Sony's Playstation 2 has given the chip maker another reason not to shut down. The company this month started preparing for the manufacture of the CPU in the third quarter, and intends to deliver 1 million CPUs and 2 million Direct Rambus DRAMs to Sony by year's end, the spokesman said.
NEC Corp., meanwhile, will temporarily shut down its three major chip plants and its LCD plants in order to conduct tests for Y2K compliance. But due to a spikes in demand for chips and flat-panel displays, the company will close the plants for a maximum of three days rather than five days as originally planned, a spokesman said.
There is also evidence of increased demand for wafers among the world's chip manufacturers. According to Nikkei Market Access, demand for wafers and total available capacity were nearly equal in April. The research firm also warned that a wafer shortage could be imminent because of a 40 percent drop in wafer prices last year, which prompted wafer manufacturers to stop expanding capacity. Meanwhile, higher demand for chips used for high-volume products like cellular phones and the low yields for 0.18-micron process technology are contributing to increases in wafer demand, the researchers said.
In it first-quarter fiscal results, Sony Corp. also said sales of semiconductors were on the rise due to stronger demand for digital audio/video products. Among its digital electronic products, the company noted higher sales for digital camcorders, digital still cameras, DVD video players, home PCs and CD-RW recording systems.
But the company's overall electronics business declined almost 9 percent to $8.7 billion due to weakening sales of older product lines and the appreciation of the yen. Among the products with declining sales were color TVs, cellular phones, computer displays, and analog camcorders. Sales of the Playstation game console also slid 15.5 percent to $950 million.
At the same time, rock-bottom DRAM prices could continue to impede major Japanese chip manufacturers from making a significant comeback this year. DRAMs are the main reason why Toshiba does not expect to pull its semiconductor operations out of the red this year, the company spokesman said.
And despite predictions to the contrary, Mitsubishi's Nagasawa said he expects there will be no DRAM shortage this year. Even though manufacturers are suppressing large-scale investments in DRAM fabs, the move from 0.25-micron to 0.18-micron process technology alone will allow chip makers to increase the number of die on one wafer from about 300 chips to 850 devices, he said.
Indeed, Toshiba said its move to an 0.2-micron process will cause monthly output to increase more than it had planned. The company had expected to produce 14 million 64-Mbit equivalent units per month by year's end, but the shift to 0.2-micron technology at its Dominion Semiconductor fab in Manassas, Va., and at its plant in Yokkaichi, Japan, plus additional outsourcing to Winbond will push monthly output up to19 million equivalent units by the end of September, the spokesman said.
With additional reporting by Yoshiko Hara