September 11, 2008

Joint Ventures Sought for Fujitsu Chip Unit

By Kiyoshi Takenaka and Kentaro Hamada

Fujitsu's microchip unit said Wednesday that it was in talks with other chip makers at home and abroad on potential alliances ranging from joint development of advanced chips to integration of operations.

Fujitsu Microelectronics also said that its earnings targets for the year to March 2009 looked challenging because of tough business conditions like higher raw materials prices and earthquake damage to one of its plants.

Fujitsu Microelectronics was established in March after the computer and computer services firm Fujitsu made its struggling microchip operations a separate entity.

"From co-development to business integration, there are some potential ways for us to go," Fujitsu Microelectronics' president, Haruki Okada, said in an interview. "We are keeping the door open on all options and our talks have not got into specifics yet."

Matsushita Electric Industrial, the maker of Panasonic brand products, has allied with the unlisted company Renesas, while NEC Electronics has teamed up with Toshiba to develop more powerful chips with finer circuitry.

Narrower circuitry makes the size of a chip smaller and helps manufacturers cut per-chip production costs.

But finer circuitry also means heavier initial investment, prompting microchip makers worldwide to join hands.

Okada said he aimed to reach a preliminary decision on potential alliances by March.

"You might wonder what's keeping us from a quicker decision," he said. "But alliances are not easy things to pull off. Each company has its own agenda and its own business structure."

Japanese chip makers dominated the semiconductor industry in the late 1980s, but they have seen their global presence dwindle gradually as they failed to secure a meaningful market share in key products like microprocessor units for personal computers and communication chips for cellphones.

Fujitsu Microelectronics offers system chips used in products ranging from digital cameras and flat-screen televisions to supercomputers.

The company has said it aimed to achieve yen490 billion, or $4.59 billion, in sales and several billion yen in operating profit in the financial year to next March, in a turnaround from an operating loss of several billion yen last business year.

"There's no denying it's going to be tough to hit the targets," Okada said. "On top of a firmer yen, higher oil and raw materials prices, we've got earthquake damage to think about."

"I picked such a time to become president," he joked.

Fujitsu Microelectronics' semiconductor plant in Iwate Prefecture, northern Japan, went through extended closures after earthquakes in June and July.

Originally published by Reuters.

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