Samsung to make system chips for Toshiba: source

Thu Dec 23, 2010 1:35pm EST
 
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(Reuters) - Toshiba Corp will outsource fabrication of system chips to South Korea's Samsung Electronics Co, freeing up resources for its memory chip operations, the Nikkei business daily reported.

For new orders starting next fiscal year, the world's third-largest chipmaker will design system chips but will outsource production to Samsung, the No. 2 firm, the daily said.

Toshiba has continually improved the functionality of system chips -- used in mobile phones, televisions and automobiles -- and trimmed circuit widths in response to demand for smaller, more energy efficient equipment, Nikkei said.

With plant constructing costs ballooning to about 300 billion yen due to expensive production equipment, the partnership with Samsung enables Toshiba to save money by eliminating the need for capacity upgrades, the daily said.

Samsung was chosen for production as it has advanced technologies and the ability to churn out large numbers of high-performance chips at low cost, Nikkei said.

Toshiba expects to turn its unprofitable system chip business around by selling its Nagasaki system chip plant to Sony Corp and specialize in image sensors at its Oita facility, the business daily said.

Toshiba, the world's No. 2 supplier of NAND flash memory with a market share of 34.9 percent, will focus on memory chips, the Nikkei said, adding it will continue to compete with Samsung, which has a 39.3 percent market share, in this field.

(Reporting by Divya Sharma in Bangalore; Editing by Unnikrishnan Nair)