Toshiba SanDisk to cut NAND flash output by 30 per cent

Japan's Toshiba and US partner SanDisk will cut NAND flash memory production by 30 per cent from January, as the global economic slowdown hits demand for the microchips used in digital cameras and portable music players.

Slumping demand and excess capacity have caused semiconductor prices to plunge, pushing makers of PC-use DRAM chips in particular to seek help, and sending Toshiba's chip business into the red in the first half of the business year.

"Toshiba's production cut is good news but that alone is not enough to lift NAND prices because overall market demand is so weak," said Song Myung-sup, an analyst at HI Investment & Securities in Seoul.

"Inventories need to be cleared before a recovery and that won't happen without demand."

Toshiba and SanDisk jointly operate two NAND plants that process cost-efficient 300mm silicon wafers at a manufacturing complex in Yokkaichi, western Japan. The two plants have a combined capacity to handle 260,000 wafers a month.

Two other factories in the complex process 200mm wafers and are run by Toshiba alone.

Toshiba said it was unclear how long the output reduction would remain in place. Prior to the January cuts, it will also halt chip output on the 300mm-wafer lines for 13 days from 31 December, its first-ever NAND flash production cut.

"All we can say at the moment is that the production adjustment will probably continue after January. Market conditions are not likely to recover that easily," Toshiba spokeswoman Hiroko Mochida said.

She added that nothing has been decided on work force reductions.

Toshiba is the world's No.2 NAND flash memory maker behind South Korea's Samsung Electronics Co Ltd.

Its microchip business, which accounts for 17 per cent of its overall revenues, booked an operating loss of 59.5 billion yen ($658m) in April-September.

Makers of DRAM chips, used mainly in PCs, are seeking help from governments, parts suppliers and clients as they scramble for cash stay afloat. South Korea's Hynix Semiconductor Inc has asked for 800 billion won ($590m) from creditors.

Debt-ridden Elpida Memory Inc and partner Powerchip Semiconductor Corp are considering selling stakes in their Taiwanese joint venture and asking for state aid as the DRAM industry crumbles. 

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