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MITI Plans to Drive Up Chip Prices

Times Staff Writer

The Ministry of International Trade and Industry plans to begin efforts later this month to drive up the prices of semiconductors on the Japanese market to make it easier for American chip makers to sell their products here, a MITI official has disclosed.

Although no announcement has been made, MITI has already appointed representatives of semiconductor users, makers and experts in the field to a “supply-demand commission,” said the official of the ministry’s electronics machinery section, who asked not to be identified by name.

The commission, whose first meeting will be sometime this month, will make forecasts of semiconductor chip supply and demand in Japan. MITI will then publicize the forecasts and, through informal “administrative guidance,” is expected to persuade chip makers to curtail production to whatever degree is needed to drive up prices.

“Establishment of the commission itself should have the effect of raising prices,” the official predicted.

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MITI, he said, cannot directly order Japanese chip makers to set prices at levels high enough to allow larger quantities of American semiconductors to find their way into the Japanese market. “That would bring us into direct conflict with the Fair Trade Commission,” he said.

But without some action, the ministry may open itself to criticism that it is not upholding its part of a U.S.-Japan agreement on semiconductor trade. In that agreement, MITI promised that it would “encourage” sales in Japan of foreign--in effect, American--chips with the aim of more than doubling their share of Japan’s market in five years, to about 20% in 1991 from 8.1% last year.

Floor Under U.S. Prices

That target, the official said, includes all chips made by American firms, regardless of whether their factories are in the United States, Japan or third countries.

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Under the agreement, the U.S. Commerce Department has fixed a floor under the prices of Japanese chips sold in the United States, driving up prices of 256K DRAM (dynamic random access memory) chips to between $2.50 and $8 from between $1.80 and $2.50 before the agreement was initialed Aug. 1. All chip sales in the American market have stagnated as a result.

“Some Japanese companies having a hard time selling in the United States have stepped up efforts at home,” driving down prices in Japan by about 16%, the MITI official said.

A 256K DRAM that cost 350 yen ($2.26) in Japan before Aug. 1 is selling for around 300 yen ($1.94) now, he said.

The official said MITI expects prices to drop in both the United States and Japan in October when the Commerce Department sets new “fair market value” floor prices based on more recent production cost data submitted by Japanese firms. But he warned that if the new floor price is fixed too high, prices in Japan will continue to be depressed by pressures to unload chips here.

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The MITI official also disclosed plans to establish by March--the end of the current Japanese fiscal year--a nonprofit foundation to promote sales of foreign-made chips here. It will stage exhibitions of foreign chips, conduct research to help foreign makers tailor their chips to the needs of Japanese users and test foreign chips for quality, he said.

Guarantee of Quality

“Japanese users often complain about failures of foreign semiconductors. The American makers’ response is, ‘Well, replace the bad chip,’ but failures hurt the image of Japanese products with their customers,” the MITI official said.

By testing foreign chips for quality, the new foundation “will provide a form of guarantee of quality for the users while reducing testing costs for them,” he said.

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Spurred by a one-year 55% increase in the value of the yen as well as by the agreement with the United States, Japanese makers are now trying to reduce their production costs by moving the assembly portions of their semiconductor manufacturing overseas, especially to the low-wage countries of Southeast Asia, the MITI official said.

Among moves reported since the U.S.-Japan chips agreement was initialed were plans by one company, NEC, to double production of 256K DRAM chips at its Singapore factory to 1 million chips a month by the end of the year and a doubling of production to 800,000 chips a month by Hitachi at a plant in Malaysia.

Other firms planning to launch Southeast Asian operations by the end of the year or early next year include Toshiba and Matsushita in Malaysia and Fujitsu in Singapore.

Although no chip maker has announced plans to open new manufacturing facilities in the United States since the agreement was signed, the MITI official noted that NEC’s Roseville, Calif., chip plant is operating at 100% of capacity, while “no semiconductor plant in Japan is now operating at full capacity.”

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