Siemens denies semiconductor crisis

Siemens has been playing down rumours that the future of its Tyneside chip manufacturing facility hangs in the balance.

The strong pound, Asian crisis and a glut of cheap DRAM chips have all contributed to companies such as Hyundai and LG scaling back their operations in the UK, and industry watchers claim Siemens will do the same.

However, a Siemens spokeswoman said: "Reports about the Tyneside facility aren't true. A review of our semiconductor interests is underway, which means looking at production capacity at our five plants, but as yet there is no indication what will happen."

Dr Mitul Mehta, senior European research manager at Frost and Sullivan, said: "The cycle that has emerged consists of companies building fabs (chip manufacturing plants) a year ago on predictions that the semiconductor market would grow. Now everyone is re-evaluating. There will be consolidation in the marketplace, and even competitors will cooperate when it comes to manufacturing."

Earlier this week, speculation was rife that the German company is about to exit the chips market altogether. The company's CEO admitted the loss-making unit will haemorrhage over DM1bn this fiscal year.