JAPAN CUTS CHIP SUPPLY, MAY PRODUCE SHORTAGE

  Japan is attempting to cut back
  semiconductor production to forstall the 300 mln dlrs in U.S.
  tariffs on Japanese electronic goods set to take effect April
  17, industry analysts said.
      The move is likely to create a sharp price rise and a
  possible shortage of the key computer components in the next
  few weeks, the analysts said.
      "Prices have gone up for memory components, the mainstay of
  the Japanese semiconductor industry," analyst Drew Peck of
  Donaldson Lufkin and Jenrette said.
      But analysts said the price rises have been slight so far,
  and some questioned whether Japan would be successful in
  forcing Japanese companies to cut production in the long run.
      Others, however, were more optimistic, saying evidence was
  already in hand that Japan has cut back prodution and halted
  sales to the grey market, the third country brokers that sell
  chips at below production costs.
      "We've seen the grey market begin to dry up for D-RAMS, and
  it has virtually dried up for EPROMS," said Merrill Lynch
  analyst Thomas Kurlack of the two key memory chips used in
  computers.
      "Prices are inching up and lead times on deliveries are
  stretching," Kurlack added.
      Industry analysts said Japan's Ministry of International
  Trade and Industry, or MITI, had requested the cut backs in
  production to meet the terms of last year's semiconductor
  accord with the U.S.
      The Reagan adminsitration recently proposed tariffs on
  Japanese electronic goods, alleging that Japan had failed to
  live up to the accord and continued to dump the computer
  components in the U.S. market.
      But some analysts said Japan's attempt to mollify the U.S.
  was a double edged sword, and might be read at a subtle form of
  trade retaliation for the tariffs proposed by the U.S.
      As production in Japan is cut, these analysts argue, prices
  will rise in the U.S. and few American semiconductor
  manufactures will be able to take up the slack since most long
  ago exited the market for memory chips. U.S. computer makers
  that use the chips in their machines will then be pressured.
      "The Japanese are looking for ways to reduce trade
  pressures from Washington, but at the same time they're
  demonstating their muscle," analyst Peck said.
      The cut backs in Japanese production are expected to
  benefit U.S. chip makers.
      "I think this could be a very important factor for U.S.
  semiconductor manufacturers," industry analyst Elliot Levine of
  Ladenburg Thalmann Co said.
      But analyst Peck said, "it will take a few weeks to see
  whether Japan has genuinely cut production."
      He said Japanese manufactures were likely to view MITI's
  request unfavorably because chip capacity was still high and
  production cut backs would lead to significant write-offs in
  plant and equipment.
  

