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NEC Raises Prices on Certain Chips : Japan's Largest Producer Cites Stronger Yen for 20% Hike

December 03, 1985|DONALD WOUTAT | Times Staff Writer

As the troubled U.S. semiconductor industry awaited government action against alleged Japanese chip "dumping," that nation's largest producer of semiconductors announced a 20% price increase Monday on two key types of memory chips.

The price hike by NEC Corp., which it attributed to the strengthened yen against the dollar, was greeted with a measure of relief among competitors battered by a collapse in prices. But critics charged that it was a transparent effort to avert U.S. trade sanctions on semiconductors.

"I don't think it's an accident that it happened the day they were anticipating a decision by the International Trade Commission on our dumping case," said Joseph Parkinson, president of Micron Technology of Boise, Ida. He said a decision had been delayed until today.

Moreover, analysts said any salutary effect of the price increase on U.S. firms will be limited to the few that haven't already abandoned the markets for memory chips because of the alleged Japanese dumping--the practice of selling exports at below cost or cheaper than in the home market. The withdrawal of several producers already had halted a long slide in memory-chip prices, which have recently begun climbing.

"The Japanese are saying, 'We own the market, now let's make some money in it,' " said Jack Beedle, president of In-State, a chip market research firm in Scottsdale, Ariz.

64K and 256K DRAMs

NEC said its pricing action was aimed mainly at inexpensive memory chips known in the business as 64K and 256K DRAMs, or dynamic random access memory chips--markets already dominated by Japan's high-quality, low-priced products. Other Japanese firms are expected to follow NEC's lead in memory chips, which store information rather than process it.

Micron Technology, one of the few remaining U.S. firms to make both types of DRAM chips affected by NEC's price hikes, had filed the dumping case last summer aimed at 64K chips, the so-called workhorse of computer memory. Meanwhile, trade publications reported Monday that a task force was recommending that the White House file its own dumping complaint against Japanese makers of 256K chips.

Texas Instruments, the other major U.S. producer of the 64K and 256K memory chips, said it considered NEC's action "very positive." Texas Instruments makes the chips at a plant in Japan, unlike Micron Technology, whose plant is here.

Such U.S. firms as Motorola, National Semiconductor, Advanced Micro Devices and Intel have all but pulled out of the 64K market as prices plummeted in 18 months to as low as 35 cents each from $3.50. Beedle says it costs at least 40 cents to make one. The 256K chip, which holds four times as much information, has now become the state-of-the-art memory chip, but its prices also have plummeted. Japan has more than 90% of that market, and few U.S. firms are bothering to enter it.

NEC said those low-priced products with narrower profit margins had been hit by the yen's 20% appreciation against the dollar since Sept. 22, when Japan, the United States, France, West Germany and Britain agreed to pressure the dollar down.

The idea was to make imports more expensive and exports less so, thus narrowing the swelling U.S. trade deficit. The process of raising import prices already has begun in other products, ranging from machine tools to such Japanese consumer goods as autos, color televisions and videocassette recorders. Also Monday, American Honda announced that it has increased the price of its 1986 cars by an average of 4%.

In semiconductors, however, trade tensions are so high that industry observers in this country doubted that NEC's action was a simple currency exchange adjustment. For instance, the 20% increases were earmarked for two types of products targeted in dumping accusations. But more moderate increases were planned for other products, even though all products are presumably affected the same by the dollar-yen relationship.

Trade Tension

Semiconductor analyst Lane Mason of Dataquest, a San Jose market research firm, said that inconsistency strongly suggests that other factors entered NEC's pricing decision. Those factors include trade tension and the recent easing of the glut of memory chips.

"When there's talk of trade friction, they have an excuse to raise prices and make more money," said Mason.

As for the yen, grumbled Micron Technology's Parkinson, "they control that, too. It's all a public relations effort."

Analyst Beedle said such price increases aren't large enough to have much effect on the retail prices of computers and other products that use memory chips because electronics and high-technology industries are so competitive.

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