Toshiba considers ramping up NAND chip capacity

Tue Jun 25, 2013 1:01pm EDT

* Incoming president says NAND plants running at full capacity

* Capital expenditure budget highest since 2010

* Prefers to sell Westinghouse stake to firm with nuclear expertise

By Sophie Knight

TOKYO, June 26 (Reuters) - Toshiba Corp may expand its NAND flash memory chip capacity just one year after oversupply and a slump in prices prompted Japan's leading chipmaker to slash production by 30 percent.

With Toshiba's existing chip facilities now running at full capacity, the company may spend some of a 38 percent hike in its capex budget this year on extending a factory, the company's incoming president, Hisao Tanaka, said in a recent interview.

Raising capacity would mean Toshiba is confident that demand for the chips, which are used in smartphones like Apple Inc's iPhone, will remain strong enough for the company to avoid the inventory glut it suffered in 2012.

"Regarding new investments, we are looking into Fab-5, though we have not made any official decisions yet," Tanaka said, referring to Toshiba's fifth NAND facility in Yokkaichi in western Japan.

"Whether we increase capacity all at once or do so gradually depends on the direction of the market. We're looking into how we can respond quickly when it's necessary."

Global prices for NAND chips, which are used in smartphones and memory cards, have picked up in 2013, while a weaker yen has given Toshiba a further advantage over rivals such as Korea's Samsung Electronics Co Ltd.

Toshiba may also be looking to buy new equipment after increasing its budget this year for investment in its electronics segment by 81 percent to 170 billion yen ($1.74 billion), the highest since 2010 and almost half of its overall capex budget.

The company, which makes a range of products from medical equipment to elevators, is hoping that NAND chips will power a 34 percent jump in operating profit forecast for fiscal 2013. The chips make up the lion's share of its memory division, which contributed roughly a tenth of Toshiba's 5.8 trillion yen ($59.44 billion) revenue last year.

Tanaka also suggested that Toshiba is hoping to expand its nuclear business, saying that it would prefer to sell a portion of its stake in U.S. nuclear power unit Westinghouse to an engineering company with expertise in building nuclear plants.

"A company which could offer us synergy with nuclear plant orders would likely be a very important partner for us," he said.

Toshiba had previously stated that it wanted to sell 36 percent of its 87 percent stake in Westinghouse, although it was in no hurry to do so.

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