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Tuesday, 18 December, 2001, 09:30 GMT
Toshiba backs out of memory market
Toshiba president Tadashi Okamura
Toshiba chief: "worst crisis in 126 years"
Japanese electronics giant Toshiba is dropping out of the memory chip market, selling its US semiconductor plant to Micron Technology and giving up on a potential alliance with German chipmaker Infineon.

Toshiba's chip business is making huge losses, largely thanks to the ailing DRAM market.

DRAM memory chips have become commoditised in recent years, with massive oversupply as Asian manufacturers moved into the market after a drought in the mid-90s.

The mess in the chip sector has been a key part of Toshiba's current travails, characterised by its president, Tadashi Okamoto, as the company's "most severe situation since the founding of our company" 126 years ago.

For the first six months of this financial year from April to September, it lost 123bn yen ($965m).

Getting out

The exact terms of the deal with Micron, the second biggest DRAM producer in the world, have yet to be determined, Toshiba said.

But it made clear that it will be taking a 40bn yen charge to cover the restructuring, and that Micron will be taking the US subsidiary Dominion off its hands completely.

The Japanese company is not getting out of the chip business. It will continue to build more specialised semiconductors, but the scrapping of commodity DRAM work will cut fixed costs on memory operations by half.

As for Infineon, it said it was still open to possible deals with other chipmakers - so long as its cash position remained unaffected.

"Following intensive talks, Infineon and Toshiba both agreed that none of the options discussed would be feasible strategies for both companies," Infineon said in a statement.

And the deal may have implications for another major chip tie-up as well.

Hynix, the world number three DRAM manufacturer, has been trying to seal a merger with Micron to solve its own deep financial troubles.

Fears that Micron could side with Toshiba instead have weighed on Hynix shares for days. But the company insists the deal is still on track despite the Toshiba sell-off.

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 ON THIS STORY
David Manners, Electronics Weekly magazine
"Everybody thought that Infineon would do the deal with Toshiba"
See also:

17 Dec 01 | Business
Chip prices boosted again
11 Dec 01 | Business
Toshiba warns of 'severe crisis'
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Toshiba cuts 18,800 jobs
26 Oct 01 | Business
Chips hit by sharp losses
06 Feb 01 | Business
Toshiba hit by US slowdown
27 Aug 01 | Business
Japan 'aid' for unemployed?
26 Aug 01 | Business
Hitachi 'joins job cutting spree'
25 Aug 01 | Business
Toshiba 'to axe 20,000 jobs'
20 Aug 01 | Business
Fujitsu to cut 16,400 jobs
27 Jul 01 | Business
Fujitsu and NEC profits slide
27 Jul 01 | Scotland
NEC confirms job cuts
26 Jul 01 | Business
Job cuts top 50,000
11 Jul 01 | Business
Japan's economy falters
20 Feb 01 | Business
Tech slump spreads to Japan
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