Memo Had Told Distributors to Undercut Rivals’ Prices : Hitachi Condemns Own Directive

Hitachi on Thursday condemned an internal directive to its semiconductor distributors that they undercut rivals’ prices to gain market share, an instruction that a top U.S. government official said amounted to predatory pricing.

Separately, Hitachi, a leading Japanese producer of semiconductors, computers and other electronic equipment, said its fiscal 1984 profit rose 26% from the previous year on a 15% sales gain.

Earlier this week, U.S. Under Secretary of Commerce Lionel H. Olmer said that he had learned of a Hitachi memorandum that instructed Hitachi distributors to undercut competitors’ semiconductor prices by 10% in order to raise the company’s share of the market.

Olmer, meeting with Hitachi executives in Tokyo, complained that such price slashing went beyond the cuts that market forces would dictate and that Hitachi’s action would injure U.S. makers of semiconductors--the tiny circuits, or chips, that power computers and other electronic products.

At a news conference Thursday in New York, Tsuneo Tanaka, president of Hitachi America, Hitachi’s U.S. unit, said the memo was written Feb. 21 by an employee of Hitachi’s semiconductor marketing office in San Jose. Tanaka did not identify the worker.

Tanaka said that the memo was “unauthorized and unapproved” and that, within a week of its discovery, Hitachi management “rejected it as being contrary to corporate policy.”

“Thereafter, Hitachi America took steps to make sure that the Feb. 21 notice was disregarded by its distributors,” he said. “Hitachi America regrets any misunderstanding this error may have caused in the interpretation of its marketing policy.”

The memo was primarily directed at the market for EPROM chips used in storing computer data. EPROM stands for erasable-programmable read only memory, meaning that data on the chip can be changed, something that is not possible with most read only memory circuits.

The U.S.-Japanese conflict is increasing now because the worldwide semiconductor business has hit a severe glut. Demand is weak and the market is awash with excess production, which has accelerated the decline in chip prices.

Olmer said Japanese makers were aiming to further build market share and crush U.S. competition during a period of weakness. He said prices for EPROMs have fallen 75% in the past year--much more rapidly, he said, than would be expected because of market forces.

Hitachi acknowledged the industry’s slump. Kouichi Kanzaki, a general manager with the parent company in Tokyo, said that the decline in prices “has not bottomed out yet.”