Hitachi puts phone chips on hold

The global slowdown in demand for IT products is hurting makers like Hitachi, Fujitsu and Toshiba

TOKYO, Japan -- Shares in Japanese chip and electronics maker Hitachi Ltd tumbled Friday after it said it would halt operations at a new plant making chips for mobile phones.

By midday, Hitachi's shares were down more than 4 percent to 1,132 yen.

Other Japanese chip makers also followed suit, with Fujitsu losing 2.6 percent to 1,201 yen and Toshiba down 3.65 percent at 607 yen.

Toshiba, Japan's biggest chipmaker, announced its own production cutbacks last month.

Fujitsu's production down 20 percent

Fujitsu, a leading maker of flash memory chips used in mobile phones and a variety of consumer electronics, said its production of the chips in June was 14 million units, down more than 20 percent from levels at the end of March.

Hitachi had already announced plans to cut spending on a semiconductor plant and equipment by 36.4 percent to $1.11 billion this business year.

Hitachi spokesman Masanao Sato said production of integrated circuit chips for smart cards used in European mobile phones would be halted in one of its domestic plans, while output would be cut at one plant in Germany and another in Japan.

Analysts have widely expected Japan's big chipmakers to curb their production and spending plans for the business year to next March from relatively bullish targets issued in late April.

Recovery in 2001-02 looking doubtful

Those figures had assumed a recovery in the chip market in the second half of 2001-02. But with demand for personal computers and mobile phones slowing, that now appears unlikely to materialize.

Hitachi and Fujitsu, like other chipmakers, had been stepping up production of chips for the mobile phone market when demand suddenly lost steam late last year.

Forecasts early in the year had called for growth of 20 percent or more in global handset sales in 2001, compared with last year's 412 million units.

Many analysts and industry executives now expect sales this year to be flat or lower than 2000.

Reuters contributed to this report.