Tokyo-based NEC and Hitachi will begin mass production of system chips this year, ahead of foreign competitors, according to the Nikkei Net news service. NEC will invest 300 billion yen ($2.3 billion,) and Hitachi 100 billion yen ($760 million), to start production.
The announcement signals the beginning of a movement away from DRAM, which has been Japanese chip makers' bread and butter. The Japanese have been hit hard in the DRAM market because of competition from South Korean and Taiwanese manufacturers, and have been looking for new markets. NEC is one of the few Japanese semiconductor companies not to have posted losses in the fiscal year ended in March, according to Nikkei.
Other Japanese semiconductor makers such as Toshiba are likely to follow suit, said Nikkei. The industry shift may also ignite demand from makers of chip-based equipment, digital TV sets, and personal digital assistants, helping to boost private-sector investment, business sources said.
NEC expects to produce 2 million system chips per month at its two domestic plants by early next year. After 2000, increased demand could push production to more than 10 million units. Hitachi will begin production late this year, Nikkei reported.
NEC and Hitachi see system chips as more profitable than DRAMs because of the companies' technological advantages over foreign competitors, industry analysts said.