Motorola, Toshiba Plan Joint Deal : Firms Will Swap Technology, Produce Chips in Japan

Motorola has signed a preliminary agreement with Toshiba that covers exchange of semiconductor products and technologies and formation of a joint venture to make computer chips in Japan.

The agreement announced Tuesday also puts Motorola of Schaumberg, Ill., back into position to make certain kinds of memory chips called D-RAMs, a business it abandoned a year ago, and promises that its Japanese partner “will actively support” better access for Motorola to Japan’s chip-buying markets.

Motorola is one of the top three semiconductor makers in the world, but its share of the Japanese market has remained small. “Gaining access to the Japanese market has been a very slow process,” Stephen Levy, executive vice president of Motorola and general manager of Japanese operations, said in a statement. “This partnership with Toshiba will enable us to accelerate our efforts.”

Also, analyst Philip D. Goodman of Duff & Phelps in Chicago said: “The more Motorola is known as a Japanese company, the easier it is for Motorola communications people to sell their products (two-way radios, pagers, cellular radiotelephones, etc.) in Japan.”

Toshiba and Motorola will buy various chips from each other; Toshiba will transfer to Motorola’s facilities worldwide its advanced memory chip-making technologies, and, during a period of five years and dependent on increases in its share of the Japan market, Motorola will transfer its microprocessor-making techniques to the joint venture facility in Japan.

The plant would be built next year, with production beginning in early 1988.

D-RAM Abandoned

Memory chips are electronic components that store information; microprocessors are more sophisticated chips that can store and manipulate information. Although D-RAM chips are a basic commodity in electronic goods, U.S. companies have abandoned the D-RAM market in the face of fierce competition from the Japanese. Whereas the Japanese have the most advanced processes for manufacturing D-RAMs, U.S. companies--especially Motorola and Intel--lead in the microprocessor segment.

The agreement specifies that Toshiba will buy 8-bit, 16-bit and eventually 32-bit microprocessors from Motorola. Eight-bit chips process eight bits of information (one character) at a time; 16-bit chips are twice as fast, and 32-bit chips are the state of the art: They handle four characters concurrently.

Motorola stopped making D-RAMs in the fall of last year, citing reduced market demand, steep price declines and excess industry-wide production capacity but saying it would reconsider if those conditions improved. Since August, Motorola has been buying memory chip-making dies from Toshiba and assembling, testing and marketing the chips itself.

Motorola could implement the Toshiba technology at any of its plants but could adjust its manufacturing to the joint venture facilities in Japan at will. Thus, it will not have to shoulder alone any worsening of market conditions in the future, said semiconductor industry analyst Drew Peck of the Gartner Group in Stamford, Conn. He called the agreement “the best of both worlds.”