Japan's Toshiba Corp and US partner SanDisk Corp will cut NAND flash memory production by 30 per cent from January, as the global economic slowdown hits demand for the microchips used in digital cameras and portable music players.

Slumping demand and excess capacity have caused semiconductor prices to plunge, pushing makers of PC-use DRAM chips in particular to seek help, and sending Toshiba's chip business into the red in the first half of the business year. Global recession and lesser consumer spending are ''particularly notable in NAND flash memories, where decreased demand for applications such as memory cards and MP3 music players has generated excess supply," Toshiba said in a statement.

Research firm Gartner forecast Tuesday a 4.4 per cent drop in world-wide semiconductor revenue for the year, based on a sudden drop in orders that it expects to trigger a 24.4 per cent plunge in revenue for the fourth quarter. In mid-November, the firm had projected industry revenue would grow 0.2 per cent this year.

A survey of 85 semiconductor executives by KPMG, scheduled for release Wednesday, reinforces the pattern. The firm, which provides accounting and advisory services to chip makers, says 52 per cent of those surveyed in November predicted revenue to fall in 2009.

Toshiba and SanDisk jointly operate two NAND plants that process cost-efficient 300-mm silicon wafers at a manufacturing complex in Yokkaichi, western Japan. The two plants have a combined capacity to handle 260,000 wafers a month. Two other factories in the complex process 200-mm wafers and are run by Toshiba alone.

Toshiba said it was unclear how long the output reduction would remain in place. Before the company cuts output in the New Year, two of the four fabrication plants producing the memory will halt operations for 13 days and the other two will stop for four days, Toshiba said.

"All we can say at the moment is that the production adjustment will probably continue after January. Market conditions are not likely to recover that easily," Toshiba spokeswoman Hiroko Mochida said. She added that nothing has been decided on work force reductions.

California-based SanDisk said in a statement production would be stopped from 31 December to 12 January at its joint venture manufacturing sites in Yokkaichi in Japan. It said when production resumed after the shutdown, it would be at 70 percent of the current flash wafer production of 290,000 300 millimeter-wafers per month.

SanDisk said the move was to align 2009 output with projected demand in the current economic environment. It also said it was in talks with Toshiba to restructure their manufacturing joint ventures and expects to sign agreements in the first quarter of 2009.

Toshiba is the world's No.2 NAND flash memory maker behind South Korea's Samsung Electronics Co Ltd. Its microchip business, which accounts for 17 percent of its overall revenues, booked an operating loss of 59.5 billion yen ($658 million) in April-September.

Makers of DRAM chips, used mainly in PCs, are seeking help from governments, parts suppliers and clients as they scramble for cash stay afloat. South Korea's Hynix Semiconductor Inc has asked for 800 billion won ($590 million) from creditors. Debt-ridden Elpida Memory Inc and partner Powerchip Semiconductor Corp are considering selling stakes in their Taiwanese joint venture and asking for state aid as the DRAM industry crumbles.