Japan News: Capex from top chipmakers down 8% in FY08

May 14, 2007 – Capital investments from Japan’s top seven chipmakers is expected to be about 970 billion (US $8.09 billion) in this current fiscal year started in April, down 8% year-on-year but still the second-highest level on record, according to the Nikkei daily paper, which gives a rundown of individual capex plans from Toshiba Corp., Elpida Memory Inc., Renesas Technology Corp., NEC Electronics Corp., Sony Corp., Fujitsu Ltd., and Matsushita Industrial Co., who collectively represent 90% of the nation’s entire chipmaker capex base.

Toshiba plans to spend roughly 331 billion yen ($2.76 billion) this fiscal year, 7% below its FY07 budget, but focused on targeting resources to its chip operations, according to president Atsutoshi Nishida. Of that amount, 250 billion yen ($2.09 billion) will go toward beefing up flash memory capacity, for which Toshiba is currently unable to fully meet demand.

Elpida Memory is hiking its annual capex by 35% this year to 210 billion yen ($1.75 billion), nearly 40% of which will go toward its DRAM JV in Taiwan with Powerchip, scheduled to start operations this summer.

Both Toshiba and Elpida face steep competition from Korean memory giant Samsung Electronics Co., which despite an 18% capex cut this year will still spend more than both firms combined, roughly 700 billion yen (5.44 trillion won, $5.89 billion). Toshiba figures memory prices could drop by as much as 50% this year, but hopes to reap cost benefits via production efficiencies through use of leading-edge processes.

Other Japanese chip firms who focus on products for smaller markets are curbing their spending this year, as they don’t expect realize the same benefits from economies of scale, notes the Nikkei paper. These firms also have lagged in overseas markets compared with Toshiba and Elpida.

Fujitsu, for instance, is cutting capex by 20% this fiscal year to 100 billion yen ($831.6 million) after seeing its chip production outsourcing operations sag. Likewise, NEC Electronics is slashing its investments by 30% to 70 billion yen (~$582.1 million). Sony has not yet disclosed its capital spending plans for chips, the paper notes, but the figure is expected to also come in at around 100 billion yen, down more than 40% from 170 billion yen ($1.41 billion) in the last fiscal year.


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