Report: Japan chipmakers slashing capex by 22%

May 27, 2008 – Japan’s top seven chip companies — Toshiba, Elpida, Sony, Renesas, NEC Electronics, Matsushita, and Fujitsu Microelectronics — plan to cut their combined capex by 21.8% in fiscal 2008 to ¥806.7B (US $7.81B), mainly due to a shift away from the weak memory market, notes the Nikkei Business Daily.

The cutbacks, following declines in the previous fiscal year, identify a move by several companies (notably Renesas and Fujitsu) to system chips, work that involves smaller production scales (and lower investments). They also tend to be custom-ordered, so production can be held back based on demand, vs. a hard push to increase output capacity and stay competitive (thus limiting risk of oversupplies).

Renesas’ planned FY08 capex, for example, is just half what it spend five years ago (FY03), focusing investments on 45nm high-performance system chips. “We are no longer pursuing a business model based on competing through output capacity,” said chairman Satoru Ito, quoted by the paper.

Toshiba’s ¥367B ($3.55B) earmarked for investments represents 45% of the seven chip firms’ spending, but that’s 10% below its FY07 levels. The company still plans to spend more than ¥1T ($9.68B) through fiscal 2010.

Elpida, meanwhile, is planning a 60% reduction in spending this year, stifling production increases to help rebalance DRAM supply/demand and shore up pricing.


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