By Sachi Izumi
TOKYO Feb 10 (Reuters) - The Japanese unit of flash memory maker Spansion Inc SPSN.O said it filed for bankruptcy protection on Tuesday with total liabilities of $810 million, the latest victim of the chip sector's global downturn.
Sharp price falls and weak demand in the chip market, which are also hurting rivals Samsung Electronics Co (005930.KS) and Toshiba Corp (6502.T), as well as declining popularity of NOR-type flash memory have prompted Spansion Inc itself to restructure operations and explore a possible sale.
The filing by Spansion Japan comes after Germany's Qimonda QMNDQ.PK, the world's No.4 maker of dynamic random access memory (DRAM) chips, became the first major chipmaker to file for insolvency last month amid the global financing squeeze and the sector's worst-ever slump.
U.S.-based Spansion Inc, the world's third-biggest flash memory maker, said the Japanese unit's filing does not "materially" affect its global operations.
It added that the unit had sufficient cash on hand to meet its short-term working capital needs.
"We intend for Spansion Japan to continue to operate throughout the restructuring period," Spansion Inc President and CEO John Kispert said in a statement.
Spansion Inc, owned 11.4 percent by Fujitsu Ltd (6702.T) and 8.7 percent by Advanced Micro Devices AMD.N, is the world's biggest maker of NOR-type flash memory with a market share of about 40 percent.
NOR memory competes against the more popular NAND-type flash memory made by Samsung and Toshiba.
NOR is used in most older cellphones and is still a mainstay in lower-end models that don't require large storage capacity for applications like music and video downloads.
The industry has been shifting towards the more expensive NAND memory because of its much higher capacity.
The global NOR memory market was worth $7.7 billion in 2007 but likely shrunk 16 percent to $6.4 billion in 2008, according to data compiled by research firm iSuppli.
Fujitsu played down any impact of Spansion Japan's failure on Fujitsu's chip sales.
Analysts said the failure, the biggest by a manufacturer in Japan this year, would have little effect on other flash memory makers.
"The NOR flash market is gradually shrinking as NAND flash improves performance and replaces NOR chips," said Park Hyun, an analyst at Prudential Investment & Securities in Seoul. "Samsung makes NOR flash chips but their portion of overall sales is limited and Samsung isn't very aggressive in expanding NOR."
Spansion Japan employs 1,350 workers, or about 14 percent of Spansion Inc's group workforce, and had sales of 179.7 billion yen ($1.96 billion) in 2006, including sales of wafers to the parent company, research firm Teikoku Data Bank said.
A spokesman at Spansion Japan said it does not reveal regional sales.
Spansion Inc, weighed down by long-term debt of about $1.5 billion, has been restructuring its operations with workforce cuts and sales of assets.
Writing down obsolete chip equipment and a tumble in the share price of Spansion Inc hurt Fujitsu's earnings last business year.
Fujitsu shares ended trade up 0.3 percent at 372 yen, against a 0.3 percent fall in the Nikkei average .N225. ($1=91.48 yen) (Additional reporting by Mayumi Negishi, Nathan Layne in Tokyo, and Rhee So-eui in Seoul; Edited by Brent Kininmont)