Report: Toshiba to postpone flash-chip plant construction

Toshiba will delay by one year the construction of two chip plants in Japan as a result of the poor economy and low flash memory prices, NHK reported Tuesday.

Toshiba will delay by one year the construction of two chip plants in Japan as a result of the poor global economic conditions and continued low prices for flash memory chips, according to a Tuesday morning report by Japanese public broadcaster NHK.

The plants in Mie and Iwate prefectures in central Japan were due to be constructed this year, with production starting sometime in 2010.

Toshiba was not immediately available for comment.

Flash memory chips are used in numerous consumer electronics gadgets such as cell phones, digital cameras and portable music players, but as sales of those devices slow, so does demand for the chips.

The memory chip market has been in a rut for some time with oversupply from the world's chip makers forcing prices down to at or below the actual production cost. A 32GB flash chip currently costs around US$5.20 on the spot market, with 2GB memory cards as cheap as $3.08, according to data from DRAMeXchange.

Toshiba's announcement to construct the new plants was a statement of confidence in the market when it was made last year because it assumed prices would rise by 2010, at which point Toshiba would be able to profit from the new production. But the production glut continued throughout 2008, and with sales of devices like cell phones and digital cameras dropping, the prospects for the market remain weak.

Just before the end of last year Toshiba said it would cut flash-chip output by 30 percent from January at its Yokkaichi factory, which was one of the two slated for expansion. It also suspended production for an unusually long 13 days over the year-end period to help it adjust to lower demand.

Toshiba is scheduled to announce its financial results for the October-to-December quarter on Thursday, when analysts expect it to revise its financial outlook for the year.

Toshiba's forecast was revised in September, before the global economic crisis took hold, and calls for an operating profit of ¥150 billion (US$1.7 billion) on sales of ¥7.7 trillion. A recent newspaper report said Toshiba is likely to post an operating loss of more than ¥200 billion for the year to March.

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