Toshiba to cut memory chip production by 30 p.c.

TOKYO, JAPAN: Japan's leading chipmaker Toshiba Corp said on Tuesday it will cut production of NAND flash memory chips by 30 percent, underscoring the challenging supply conditions in the chip market and knocking its shares.

Toshiba, the world's No. 2 maker of NAND flash memory chips after Samsung Electronics, said it will slash production at its Yokkaichi plant in western Japan due an oversupply of chips for USB drives and memory cards.

"I'm a little surprised that they're cutting that much. Everyone knows that demand has not been as strong as expected," said David Motozo Rubenstein, senior technology analyst at Religare Global Asset Management in Tokyo.

"Apple's their biggest customer, with the new iPhone likely to come out later this year you would think they would build a little inventory for that," he added.

The company's flash memory chips have been a bright spot in Japan's struggling electronics industry, and analysts say that more than half of Toshiba's output ends up in Apple's iPhones.

Chipmakers like Samsung, SanDisk, Micron Technology Inc and SK Hynix ramped up their NAND production capacity in a buoyant market for smartphones and tablets, but a glut in supply drove prices to new lows.

NAND prices have fallen as much as 60 per cent in the last year, according to chip industry tracker DRAMeXchange. Toshiba last cut NAND production in January-June in 2009, also by 30 per cent. Analysts estimate a 35-40 per cent drop in NAND prices this year alone.

Shares in Toshiba tumbled 3.3 per cent to 267 yen in early Tokyo trading, compared to a 0.6 percent decline on the benchmark Nikkei .N225.

Toshiba, which manufactures everything from lightbulbs to nuclear reactors, is slated to report its April-June quarter results on July 31.