Toshiba Corp plans to sell chip­mak­ing fa­cil­ity to Sony Corp

The Pak Banker - - Company& -

TOKYO: Toshiba Corp., Ja­pan's biggest chip­maker, plans to sell a semi­con­duc­tor fac­tory to Sony Corp. and out­source some out­put to big­ger ri­val Sam­sung Elec­tron­ics Co. as it tries to im­prove prof­itabil­ity at the chip busi­ness.

Sony will buy Toshiba's plant in Na­gasaki, western Ja­pan, which makes the Cell graph­ics chips used in PlayS­ta­tion 3 video game con­soles, the two com­pa­nies said in a joint state­ment to­day, with­out dis­clos­ing fi­nan­cial de­tails. Toshiba is also in talks to shift more pro­duc­tion of its non-me­mory prod­ucts to other chip man­u­fac­tur­ers, in­clud­ing Sam­sung, said Hiroki Ya­mazaki, a spokesman for the Tokyo-based com­pany.

Toshiba shares rose to the high­est level in three weeks in Tokyo to­day. The com­pany, which will shut a plant this month to phase out low-end chips, can cut costs and im­prove ef­fi­ciency by sell­ing the fac­tory and team­ing up with other man­u­fac­tur­ers, said Takeo Miyamoto, a Toky­obased an­a­lyst at Deutsche Bank AG.

"It's about cut­ting ex­penses," he said in a phone in­ter­view. "The fac­tory they're sell­ing back to Sony, it wasn't profitable or ef­fi­cient for them."

Toshiba's shares rose 0.7 per­cent to 441 yen at the 3 p.m. close of trad­ing, the high­est level since Dec. 6.

The com­pany will con­tinue to pro­duce some sys­tem LSI chips, whose func­tions range from pro­cess­ing im­ages for tele­vi­sion screens to crunch­ing data, it said.

Sam­sung, Asia's biggest maker of chips, will man­u­fac­ture wafers for Toshiba us­ing its 40-nanome­ter technology, the Su­won, South Korea-based com­pany said in a state­ment to­day. Sales of prod­ucts that Sam­sung man­u­fac­tures for other com­pa­nies may ac­count for about 15 per­cent to 20 per­cent of its cur­rent sys­tem LSI semi­con­duc­tor sales, Seo Won Seok, a Seoul-based an­a­lyst at NH In­vest­ment & Se­cu­ri­ties Co., said.

In June, Sam­sung said it will in­vest $3.6 bil­lion to ex­pand ca­pac­ity at its 12-inch chip plant in Austin, Texas. The new fa­cil­i­ties, which will be in full op­er­a­tion by late 2011, will be used to make LSI chips, Bill Cryer, a Sam­sung spokesman, said on June 9.

Toshiba's chip di­vi­sion broke even in 2009 af­ter in­cur­ring a 280 bil­lion yen ($3.4 bil­lion) op­er­at­ing loss in the pre­vi­ous year. Sys­tem LSI chips will ac­count for 30 per­cent of the 1.2 tril­lion yen in sales Toshiba fore­casts from its chip busi­ness this year, ac­cord­ing to the com­pany.

Toshiba also said to­day it will con­sol­i­date pro­duc­tion of ana­log and imag­ing chips at its plant in Oita, on the south­west­ern is­land of Kyushu, and in Iwata, north­ern Ja­pan.

Sony will buy back the Na­gasaki fa­cil­ity for about 50 bil­lion yen to dou­ble its monthly pro­duc­tion ca­pac­ity of the sen­sors, used in dig­i­tal cam­eras and smart­phones, to about 40,000 units, the Nikkei news­pa­per re­ported yes­ter­day. Sony sold the plant in Na­gasaki pre­fec­ture to Toshiba in 2008. In a sep­a­rate news item, Nitto Denko Corp., maker of op­ti­cal film for about a third of the world's LCD pan­els, will boost spend­ing for the first time in five years as com­pa­nies such as Sharp Corp. and Ap­ple Inc. sell new tablet PCs and smart­phones.

"Cap­i­tal spend­ing in equip­ment and fa­cil­i­ties next fis­cal year will be big­ger than this year," Pres­i­dent Yukio Na­gira said in a Dec. 22 in­ter­view, de­clin­ing to give a spe­cific fig­ure.

In­vest­ment re­lated to fac­to­ries and pro­duc­tion equip­ment, down by about 50 per­cent from 2006, is the com­pany's high­est pri­or­ity for us­ing its cash, fol­lowed by div­i­dend pay­outs, merg­ers and ac­qui­si­tions, and stock buy­backs, ac­cord­ing to a doc­u­ment re­leased in May. Nitto Denko spent about 75 bil­lion yen ($903 mil­lion) on equip­ment and fa­cil­i­ties in 2006, and plans to in­vest 36 bil­lion yen this fis­cal year.

De­mand for touch pan­els used in smart­phones, tablet com­put­ers and elec­tronic book read­ers will grow "ex­plo­sively," said Na­gira, who has been pres­i­dent of the Osaka-based man­u­fac­turer since 2008.

Re­searcher ISup­pli Corp. in a Septem­ber re­port es­ti­mated ship­ments of e-read­ers will rise more than five-fold from last year to 26.5 mil­lion units by 2014. Ap­ple be­tween April and Septem­ber this year sold 7.46 mil­lion units of its iPad, which also has e-reader func­tions, ac­cord­ing to Bloomberg data. Nitto Denko said in July it would in­vest about 20 bil­lion yen over two years to in­crease pro­duc­tion ca­pac­ity of op­ti­cal films for liq­uid-crys­tal dis- plays. Na­gira said the com­pany will fo­cus its in­vest­ment on med­i­cal sci­ence, en­vi­ron­men­tal tech­nolo­gies and new en­ergy, in­clud­ing bat­ter­ies, and is also con­sid­er­ing ac­qui­si­tions in these ar­eas.

Nitto Denko hasn't made an ac­qui­si­tion since it bought Florida-based Elan Trans­der­mal Tech­nolo­gies Inc., a maker of skin patches, for $45 mil­lion in 2003.

The shares have risen 17 per­cent this year, out­per­form­ing the 1 per­cent in­crease by its peers in the 119-mem­ber Topix Chem­i­cal In­dex. Nitto Denko traded 0.4 per­cent lower at 3,785 yen as of 9:22 a.m. on the Tokyo Stock Ex­change. -Bloomberg

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