TOKYO -- Sumitomo Metal Mining announced Friday that it will withdraw from the making of lead frames for semiconductor packages, saying that commoditization of the market is eating into revenues and profits for these products.
The Japanese metal materials giant plans to sell its subsidiaries involved in the business and use the proceeds to boost production of cathode materials for electric car lithium-ion batteries -- and for acquisitions in new fields.
A lead frame is a framework of metal contacts inside the semiconductor chip package that serves to connect the chip with the outside world on the circuit board.
Sumitomo Metal said its six foreign group companies involved in integrated-circuit lead frames for computer memory and other chips will be sold to Taiwanese liquid crystal display materials company Chang Wah Electromaterials for 15 billion yen ($140 million).
In addition, Sumitomo Metal said it has signed a letter of intent with Taiwan's Jih Lin Technology to negotiate the sale of its two foreign companies and one domestic company involved with lead frames for power semiconductors.
That leaves one domestic unit in the lead frame business that is not in play, but Sumitomo Metal said the sale of this company is also under negotiation with Chang Wah.
Sumitomo Metal entered this business in 1963 and has a 13% share of the global market. But Chinese manufacturers have turned lead frames into a commodity in their rise to market dominance. Amid the ongoing slump in the semiconductor market, the company tallied sales of 40 billion yen in the year ending March 2016 in this sector, accounting for just around 5% of its total sales.