TOKYO (Reuters) - Japan’s Toshiba Corp (6502.T), the world’s No. 2 maker of NAND flash memory, said on Thursday that NAND prices could pick up in the July-September quarter, as demand from PC and more sophisticated mobile phones increases.
Toshiba, whose semiconductor business posted an annual 80 percent decline in operating profit in January-March as NAND prices collapsed, said it expects price of NAND chips, used in portable gadgets like Apple Inc’s (AAPL.O) iPod, to be flat this quarter.
“Prices will either be flat or go up a bit in July-September,” Toshiba Corporate Senior Vice President Shozo Saito told the Reuters Global Technology, Media and Telecoms Summit.
He said demand for Toshiba’s high-capacity flash memory chips was strong, adding that the company was currently receiving orders for about 5 percent more than it could supply, and that this gap would likely expand to about 10 percent in the July-September quarter.
Even though prices are stabilizing, to be safe, the company is still prepared for a drop of up to 50 percent this business year, Saito said.
“The past data shows an average 50 percent annual decline, and we should be ready for that,” he said. “And we will keep profit margin by cutting costs by 50 percent and more.”
If prices fall further, Saito said the chip maker would curb plans to up output.
He said it was possible that the company would initially start production at only one of two NAND factories it is planning to build in 2010.
Toshiba and partner SanDisk Corp SNDK.O together plan to spend a total 1.7 trillion yen ($16.5 billion) on two new plants in Japan, but SanDisk has so far only committed to investing in one of them.
“It depends on the market situation. If NAND prices fall too much, we will leave factory buildings empty,” he said.
“We could start production at one plant first, and if so, we think that would be the one in Yokkaichi,” in western Japan, he said.
Toshiba, which trails South Korea’s Samsung Electronics Co Ltd (005930.KS) in NAND market, has been trying to shield itself from sharp price fluctuations by shifting more towards “embedded” NAND memory used for portable music players and other digital devices. Embedded chips also include software and command higher prices.
He said the firm will increase the percentage of the embedded NAND to 70 percent of the total in one year from current 50 percent.
Among other things, the chip maker sees huge potential from makers of laptop PCs, who are increasingly turning to NAND memory as an alternative to hard disk drives.
(For summit blog: summitnotebook.reuters.com/)
Reporting by Taiga Uranaka and Mayumi Negishi; Editing by Hugh Lawson and Louise Heavens