Memory Makers make Chips while the Electronics Market Shines – Toshiba predicts Profits to Double

Toshiba today forecast that its profits would double due mainly to its NAND operations. In 2007 and 2008 , memory makers across the world saw their profits and margins dip into huge losses as overcapacity killed pricing.Most the the manufacturers were producing chips at below costs.The situation was not sustainable and it led to the collapse of big companies like Qimonda and Spansion.The whole Taiwanese memory industry with players like Promos,Powerchip and Nanya also were running on life support and some of them are still bleeding.While for investors the memory of that period was painful the main takeaway was the importance in sticking with cost and technology leaders like Toshiba,Elpida,Sandisk,Micron and Samsung.Despite losses these companies could survive due to their technology and cost leadership.When the weaker hands went bust and demand returned strongly through the secular growth in devices like iPads,smartphones,laptops ,these companies could benefit.

Toshiba sees profit doubling, ramps up chip capex – Reuters

Toshiba Corp he world’s No.3 chipmaker, beat expectations by forecasting profit to more than double this year, and said it would ramp up capital spending to meet brisk chip demand.

Chipmakers are expecting a recovery for the sector to accelerate this year as consumers snap up smartphones and tablet-style devices, but some analysts have warned rapid business investment could lead to another supply glut.

Toshiba said it plans to nearly double its chip spending to 160 billion yen ($1.8 billion) this financial year. Bigger rival Samsung Electronics  also plans to sharply increase spending.

“Toshiba is understandably planning to boost its chip spending to meet increasing demand and to compete against South Korean rivals,” said Kazutaka Oshima, chief executive at Rakuten Investment Management.

“The amount of investment in the semiconductor production facility is large, but the issue is whether Toshiba will be able to build the plant on time to meet growing demand,” he said.

Toshiba, second-ranked in NAND-type flash memory after Samsung, is also trying to cut costs and focus on promising business areas including nuclear power and lithium-ion batteries to counter the impact of volatile chip prices.

NAND chips are used in consumer products such as Apple Inc’s iPhone and iPad. Toshiba is the world’s third-biggest chipmaker after Intel and Samsung.

“Compared to the pessimism we were feeling a year ago, there are signs that the outlook has turned brighter even though we cannot go as far as being optimistic,” Toshiba Senior Executive Vice President Fumio Muraoka told reporters.

Toshiba expects its chip division to log a 100 billion yen operating profit this financial year, mostly from its flash memory operations, better than a mere 2.3 billion yen profit last year and a 280 billion yen loss the year before that.

Cost cuts and stable NAND prices helped improve its semiconductor business last year but Muraoka said the company expects the average flash memory price to fall about 20 percent this financial year.