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Renesas Technology Corp, the world's fifth biggest chip maker, said on Friday it would invest about 100 billion yen ($940 million) by March 2007 to expand production capacity at its plant in eastern Japan. Satoru Ito, the company's incoming chief executive, also told Reuters in an interview that Renesas would likely post lower sales and profit in the next business year compared with the current year as a result of falling chip prices.
Unlisted Renesas is a joint venture between Japanese electronics conglomerates Hitachi Ltd and Mitsubishi Electric Corp.
Ito said commercial production at the plant's new lines, which process 300-mm silicon wafers, would start by the end of the next business year starting in April.
The larger-sized wafers can yield more than twice as many chips per wafer as the standard 200-mm variety, helping microchip makers cut costs and allowing them to offer products at competitive prices.
Ito did not specify the size of the planned capacity increase, saying it would be phased in according to demand.
He said, however, that the expansion project would use half the floor space on the first floor of the company's plant in Ibaraki prefecture, north-east of Tokyo.
Capacity on the second floor, where production equipment is fully installed, is 14,000 wafers a month.
For the year starting in April, revenue and profit are expected to fall from a year earlier on the back of steep price declines and sluggish demand, Ito said.
"Sharp price falls are outweighing our cost-cutting efforts," he said.
Renesas originally forecast an operating profit of 60 billion yen on sales of 1.09 trillion yen for this business year, but later said its revenue and profit would likely miss initial estimates by 10 percent.

Copyright Reuters, 2005

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