Toshiba Corp, the world’s second-biggest maker of NAND flash memory, expects its newest plant to lift capacity by a smaller-than-expected 40 percent by December 2008.

The Japanese electronics maker, which is hunting for workers to man its microchip plants to keep up with demand for portable electronics, said on Tuesday it wanted to gauge markets early next year before committing to bigger ramp-ups.

It kept mum about future expansion plans.

Toshiba expects its cutting-edge factory, built in western Japan with partner SanDisk Corp, to reach monthly production capacity of 80,000 300mm wafers in July-December next year. That would lift the current monthly wafer-processing capability from 200,000 to 280,000.

“The figure is far too modest,” said Macquarie Securities analyst Yoshihiro Shimada. “Very roughly speaking, it’s about half what it should be, given Toshiba’s output targets.”

Toshiba has been unable to meet about 25 percent of demand for NAND this quarter, which rose after power outages at Samsung Electronics Co Ltd lines, Toshiba corporate senior vice president Shozo Saito said.

Asked if the production capacity target was conservative, Saito told Reuters on the sidelines of the new factory’s opening ceremony: “Yes.”

Toshiba expects demand for NAND, widely used for data storage in portable electronics such as Apple’s iPod digital media player devices, to grow by an average 130 percent a year between 2006 and 2010.

But Toshiba and SanDisk executives remained silent about plans to build another plant, to go online in 2009 when the new number-four NAND plant is expected to reach full capacity of 210,000 wafers per month. A decision on the location would be made by March, Saito said.

Toshiba held 27.5 percent of the global NAND market in April-June versus Samsung’s 45.9 percent, according to US research firm iSuppli, and it hopes the new plants would close that gap.

Toshiba shares closed down 0.1 percent at ВҐ1,049 (ВЈ4.48) after the announcement, while the benchmark Nikkei average fell 0.6 percent.

Diminishing returns
The new number-four NAND plant will have a production capacity of 60,000 300mm wafers per month by June next year. It would begin sample shipments of chips made using 43nm (nanometre) technology at the end of December, more cost-efficient than 56nm ones.

A nanometre is one billionth of a metre. Using finer circuitry decreases the size of a chip, enables faster data processing and cuts production costs per chip. Samsung plans to start producing 50nm products this year.

But it becomes increasingly difficult to make advances in technology and milk returns, SanDisk chief executive Eli Harari told a news conference.

“Technological improvements become more difficult and may take longer to achieve,” he said.

NAND prices recovered in April-June from price falls of 70 to 80 percent, boosted by hopes for photo-snapping phones, portable music players, and the use of flash memory instead of hard drives in zippy В— if pricey В— laptops.

By 2010-2011, PC-use flash memory will be one of the largest markets of flash memory, making up 30 percent of NAND demand, Harari said.

Despite the rosy picture and the August back-to-school season, NAND prices have been flat in August on worries that the sub-prime mortgage troubles would dampen US consumers’ appetite for gadgets, according to research firm DRAMeXchange.

Other NAND suppliers gearing up for ramp-up include Hynix Semiconductor Inc, which has been shifting its dynamic random access memory lines to NAND production, and a joint venture by Micron Technology and Intel Corp.

“Whether or not suppliers are in for a supply glut next year depends on how they price their chips now, when there is a shortage. If the price is too high, they could kill future demand,” said Shimada.