Price cutting by Korean suppliers of memory chips brought a dramatic fall in the value of DRAMs shipped by NEC and further price cuts of 20% are expected this year. In the year to March 31, memory chips comprised 30% of revenue, compared with 43% in the previous year, said NEC Senior Executive Vice-President Hajime Sasaki, head of the Semiconductor Division. Expressing concern at the the behavior of Korean memory suppliers, Mr. Sasaki feared a repeat of the scenario of ten years ago among Japanese manufacturers, where price cutting in the DRAM market led to a loss of revenue and market share. This year, he expects memory chips to contribute 32% of revenue, with an increase in the average number of DRAM chips installed to 32MB slightly offset by anticipated price erosion of up to 20%. Systems LSIs comprised 56% of revenue last year and will be around 55% this year. Mr Sakasi said NEC’s strategy in the CPU market is to focus on both its proprietary system chip and its MIPS architecture chips, both of which are more profitable than DRAM. Its proprietary chip business is based on the VR/V800 chip which it will develop as a system-on-a-chip for the printer, storage device and automotive market, to be worth $4.3bn by the year 2000. The RISC product business is currently based on sales to Nintendo, for its 64-bit game machines. Production is being ramped to 2 million units per month. Mr. Sasaki sees additional opportunities for MIPS-based derivatives in volume applications such as printers, network controllers and Personal Digital Assistants based on Windows-CE. He said NEC needs to be involved in a process that takes 2.5 years on average from start of design-in to volume shipment. Capital investment in NEC Semiconductors’ plant in Scotland will increase from $224m last financial year to $320m this financial year, as the second 8 inch wafer fabrication line builds up production.
