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Toshiba to resume $8.9 bn chip expansion

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CIOL Bureau
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TOKYO, JAPAN: Toshiba Corp will spend 800 billion yen ($8.9 billion) to build a new microchip plant, reviving plans that it had put on hold amid sluggish sales, the Nikkei business daily said.

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Japan's biggest chipmaker is likely to start construction of the new domestic factory for NAND flash memory chips as early as this summer, aiming to begin operations in spring 2011, the Nikkei said on Wednesday, prompted by a pick up in demand.

Toshiba is the world's second-largest NAND flash memory maker behind Samsung Electronics Co Ltd.

Unlike dynamic random-access memory (DRAM) chips, the standard memory used mainly in PCs, NAND flash memory can retain data after power is shut off, and is widely used in digital cameras, mobile phones and portable music players.

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"NAND demand is set to grow stronger in the long term than DRAM demand. It is the right step to expand capacity to meet that growing demand," said Mizuho Investors Securities analyst Yuichi Ishida.

"Without investing in capacity now, it would be running the risk of falling further behind Samsung."

Samsung held a 39.3 per cent share of the global NAND flash memory market in July-September, followed by Toshiba with 34.6 per cent and Hynix Semiconductor Inc with 10 per cent, according to data from research firm iSuppli.

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Samsung, also the world's No.1 DRAM chip maker, plans more than 5.5 trillion won ($4.7 billion) in capital spending for memory chips this year, and said it was seriously considering raising that investment.

"Market conditions are likely to remain relatively tight until the second half of this year as demand from new gadgets such as smartphones and tablet PCs will be strong," Hi Investment and Securities analyst Song Myung-sub said.

"But supply could outgrow demand significantly starting early next year because chipmakers are aggressively boosting capacity to ramp up production after years of underinvestment."

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Toshiba said nothing had been decided about the new plant.

In February 2008, the Japanese electronics maker said it and partner SanDisk Corp would invest 1.7 trillion yen in two new flash memory plants, but falling demand following the global downturn forced them to shelve the project a year later.

The Nikkei report comes as rival chipmaker Micron Technology Inc is set to expand its presence in the memory chip market by acquiring privately held Numonyx Holdings, the world's largest maker of NOR-type flash memory chips.

NOR chips are used to store software programmes in cellphones and other electronic devices.

Shares in Toshiba closed up 0.2 per cent at 420 yen, underperforming a 0.6 per cent gain by the Tokyo stock market's electrical machinery index.

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