August 7, 2008

Nikon to Lift Output of Chip Machines

By From news reports

The Japanese precision equipment maker Nikon announced Wednesday plans to more than double its output of cutting-edge machines for making semiconductors, as chip makers race to cut production costs.

The investment of yen35 billion, or $323 million, over the next three years by Nikon - the world's No.2 maker, behind ASML of the Netherlands, of steppers, the machines that map out electronic circuits on silicon wafers - comes amid an industrywide slump that has prompted chip makers to rein in spending and led Nikon to cut its sales target.

Nikon is betting that semiconductor makers like Intel and Elpida Memory are willing to spend heavily on advanced tools that can lower defect rates and squeeze thinner circuitry onto smaller chips to cut costs.

The company plans to raise its production capacity for immersion machines, which use distilled water to print circuit patterns, to 90 units a year to meet demand from makers of logic chips and computer memory chips.

"Our customers may be cutting spending, but they are spending on immersion," Nikon's chief financial officer, Ichiro Terato, said at a news conference. "They realize that immersion will help them cut costs in the long run."

Terato said the company was keeping its target of selling 25 of the immersion chip-making machines by March.

ASML is trying to make inroads in Japan, winning orders from Nikon customers like Toshiba, while Canon, the third-largest maker of steppers, is also seeking to undercut its two larger rivals.

Nikon, which is also one of the world's largest makers of digital cameras, also said Wednesday that its operating profit fell 20.5 percent in its first quarter to June, to yen28.72 billion, as it dealt with a strong yen, falling camera prices and an accounting change.

Quarterly profit in its precision equipment segment fell 24 percent from a year earlier, as chip makers pushed back investment plans, and it scaled back its full-year sales target for steppers to 105 units, down from a target of 112 units set in May.

Amid concerns of a global economic slowdown that would hit sales of cameras and semiconductor equipment, Nikon maintained its forecast of a 3.8 percent decline in operating profit, to yen130 billion, for the year to March 2009, while 18 analysts polled by Reuters Estimates predicted an average profit of yen138 billion.

The company, which generated 73 percent of sales outside of Japan last year, is fighting to extend sales of digital single-lens- reflex cameras amid fierce competition from Canon, and is also grappling with falling prices for compact cameras.

Prior to the results announcement, shares of Nikon closed 4.3 percent higher at yen3,050.

Originally published by Reuters, Bloomberg.

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