Report: Kobe Steel to Quit Chip Business

Kobe Steel Ltd. is in the final stage of negotiations to sell its 75 percent stake in KMT Semiconductor Ltd. to joint-venture partner Micron Technology Inc., the Nihon Keizai Shimbun has reported in its Wednesday morning edition.

The company is looking to withdraw from the semiconductor sector because of the huge investments needed to stay competitive in the business, said the newspaper. It faces an investment of about 100 billion yen (US$925.9 million) to upgrade its production lines from 0.18 micron to 0.15 micron production in order to begin manufacturing 256M-bit DRAM (dynamic random access memory) chips, according to the newspaper.

A deal with Micron, which could see the U.S. chip giant pay between 10 billion and 40 billion yen for the stake, is expected to be reached soon, the report said.

Kobe Steel denied it was close to signing a deal with Micron.

"As our joint venture partner in KMT, we are always in constant contact with Micron," said Gary Tsuchida, a spokesman for Kobe Steel. "They supply the chip technology needed to run the company, so we do discuss issues such as how to best manage the company," he said.

KMT Semiconductor was initially formed in 1990 as KTI Semiconductor Ltd., a joint venture with Texas Instruments Inc. In 1998 TI pulled out of the memory sector to focus on production of logic devices and Micron Technology bought the company's memory-related businesses, including TI's 25 percent stake in KTI. The company was then renamed KMT Semiconductor.

(Editors: Images to accompany this story are available in the IDG News Service Image Bank.)Kobe Steel, in Kobe, Japan, can be contacted at +81-78-261-5183 or found online at http://www.kobelco.co.jp

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