NEC to Expand U.S. Chip Making : Big Japanese Firm Plans 60% Increase at California Plant
NEC will expand semiconductor production by 60% at its California plant by next March, a move that will enable the company to sell greater numbers of chips in the United States more cheaply than it and other Japanese makers can sell imports.
NEC’s Tokyo office said it expects to increase production of 256K D-RAM chips to 3.5 million a month from 2.2 million. Analysts said that means NEC could supply about 70% of its U.S. customers with chips made at its U.S. plant, which is located in the Sacramento-area community of Roseville. U.S.-made chips are exempt from a recent trade agreement under which imports are assigned minimum pricing levels.
Kiochi Shimbo, U.S. spokesman for Tokyo-based NEC, the world’s largest chip maker, said it had not been decided whether all of the devices made in the Roseville plant would be sold in the United States or whether some might be exported.
Analysts said the ability to undercut prices it must now charge was most likely the primary motive for NEC’s move, but it also fits the pattern of Japanese companies expanding their U.S. manufacturing.
The 256K D-RAM chip is the standard memory device in many electronic products, from computers to household appliances. In past months, prices of the devices have been rising because of the U.S.-Japan trade agreement that sought to end worldwide dumping of chips by Japanese manufacturers.
Under that agreement, the U.S. Commerce Department assigns “fair market values,” based on production costs plus an 8% margin, to Japanese-made chips sold in the United States.
Those FMVs, as they are called, have increased prices to as much as two to four times what they were before the agreement; U.S. chip makers have hiked prices they charge as well.
But chips are exempt from the agreement if they are fully manufactured in the United States. Although other Japanese chip makers have assembly and test facilities in the United States, only NEC has full-fabrication facilities here.
