Toshiba to outsource production of chips | Shanghai Daily

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September 8, 2009

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Toshiba to outsource production of chips

TOSHIBA Corp is in talks with two Singaporean companies, Chartered Semiconductor and Globalfoundries Inc, about outsourcing production of some of its next-generation system chips to help cut costs, two company sources said.

Toshiba, which sources have said plans to bid for French nuclear group Areva's power transmission and distribution unit, is looking to save costs at its loss-making chip division as it seeks more stable revenues from the power business.

The world's No.2 maker of NAND flash memory chips plans to make 28-nanometer chips at its plant in Oita, southern Japan, but is considering contracting out production of chips exceeding its capacity, said company spokeswoman Hiroko Mochida.

But Yuichi Ishida, analyst at Mizuho Investors Securities, said he expected Toshiba to outsource all of its 28-nanometer chip production.

"It makes no sense to go to the trouble of investing in expensive equipment to make these cutting-edge chips if you're going to outsource as well. Why spend money you don't have to?" he said.

The sources said Toshiba is in talks with Chartered and Globalfoundries - the two foundries in an IBM-led consortium to develop next-generation system chips, used in a wide range of electronics, from game consoles to digital cameras.

The two contract chip makers may soon come under the same roof after Abu Dhabi's state fund Advance Technology Investment Co, which owns 55.6 percent of Globalfoundries, offered to buy Chartered Semiconductor for US$1.8 billion. Globalfoundries is a joint venture with Advanced Micro Devices (AMD).

Toshiba's Mochida declined to comment on which company has the best chance.

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