Chip Makers in Japan Boost Plant Spending : Technology: Firms are betting on demand for next-generation systems.

Japanese microchip makers, more optimistic than others that their industry will continue to grow, have announced increased investment in plants and equipment.

The new spending, on top of already large investment by the industry, has been called “excessive” by some foreign microchip makers. But Japanese firms say new funds, mostly for expensive plants to make next-generation chips, are necessary.

“Four-megabit dynamic random access memory (DRAM) microchip plants cost a lot--it’s not excessive, only what’s needed,” a Mitsubishi Electric spokesman said.

Some foreign firms, expecting slower demand, fear a repeat of the excess supply that threw the industry into a depression and forced many U.S. firms out of the business in the mid-1980s.

“There is a continuing trend among the Japanese companies to stay ahead of demand by a very large margin,” Intel Japan KK Chairman Takahiro Kamo said in a recent interview. Intel Japan is a unit of Intel Corp. of the United States.

But the Japanese firms boosting investment say growth in demand for the current one-megabit DRAMs, while slowing, will remain positive in 1990.

In addition, current investments are for four-megabit DRAM plants that will not come on line until 1990 or 1991, when demand should rise, they say.

“Global demand is slowing now, but we think it will still be positive next year, and grow even more in 1991,” said a spokesman for Hitachi Ltd.

The company is boosting its microchip capital investment for the fiscal year to March 31 to $669 million (95 billion yen), 35.7% above last year’s level.

Mike Jeremy, electronics analyst at Baring Securities (Japan), said Japanese microchip makers were “front-loading” their investments now, before slumping microchip prices erode profitability next year and make extra spending harder.

“They’re spending prudently while they have cash and time in their favor,” he said. “The longer they wait to introduce four-megabit DRAMs, the more chance there will be for a challenge from overseas competitors. They want to lead the four-megabit DRAM generation,” he added.

U.S., European and South Korean makers are aggressively pursuing Japan’s technological lead, hoping they can catch up before demand soars, Jeremy said.

Hitachi, Toshiba Corp., Fujitsu Ltd. and other Japanese makers plan to begin mass-producing four-megabit DRAMs in mid-1990.

But demand for the chips is not expected to be strong until a year later, with the introduction of high-definition televisions and increased sales of engineering workstations and 32-bit personal computers, Jeremy added.

Mitsubishi announced the most dramatic increase in investment, raising its microchip-related capital spending for 1989-90 to $437 million (62 billion yen), 37.8% above last year.

“We’ve made a big increase, but our amount had been low. Now we’re catching up with our competitors’ level,” a Mitsubishi spokesman said.

He said all of the increased outlay would go toward a new four-megabit DRAM plant scheduled to go on line in 1991 with a capacity of 8 million chips a month.

Toshiba and NEC have also announced increases in investment.