Fujitsu, NEC to Idle Chip Plants on Weak Demand
By Ryoko Imaizumi, Lindsay Whipp and Minoru Matsutani
Tokyo, Oct. 3 (Bloomberg) -- Fujitsu Ltd. and NEC Corp., facing a deepening slump in demand for semiconductors, said they will temporarily idle some of their chip plants in Japan.
Fujitsu will halt production later this month at three chip factories for five days, company spokesman Hidefumi Aoe said, confirming a report in the Nihon Keizai newspaper. NEC will halt production at three local plants and one line at a fourth plant for four days, company spokesman Makoto Miyakawa said.
Japanese chipmakers, along with rivals such as Advanced Micro Devices Inc. and Intel Corp., are slashing jobs, scaling back production and curbing investment to cope with what analysts say will be the industry's worst year on record. Semiconductor sales worldwide fell 42 percent in August to $10.5 billion and will probably slump even further following last month's terrorist attacks in the U.S., an industry group said this week.
``We haven't seen a recovery in consumer demand in the U.S., which is supposed to be pulling the rest of the world,'' said Nobuaki Murayama, who manages 60 billion yen in assets at Cigna International Investment Advisors K.K. ``With no release of attractive products expected, the whole recovery of the industry is shifting forward.''
In a further sign the slowdown is spreading, TDK Corp. may miss its profit target, signaling that Japan's computer-components slump may be deeper and last longer than expected, the Nihon Keizai newspaper also said today.
TDK, Japan's biggest maker of disk-drive parts, will break even in its fiscal year that began April 1, missing its 21 billion yen ($174 million) group profit target, the paper said.
Joining Fujitsu and NEC, Sony Corp. said it will delay plans to begin mass-producing some types of chips for digital cameras at a new plant by as much as a year.
Murky Outlook
Given the murky outlook for demand, Fujitsu is controlling inventories more tightly. ``We just don't want to carry additional inventory when things aren't clear,'' said Aoe.
Fujitsu, Japan's biggest maker of business computers, will put electricity at three plants, in Iwate, Fukushima and Mie prefecture, in stand-by mode. Once power is off, switching back on would take at least half a day, Fujitsu spokeswoman Chiaki Kuwahara said. The 5,000 employees at the three plants will receive 90 percent of salary during a halt, she said.
It would be impossible to calculate how much output Fujitsu will cut by suspending production at the chip plants for five days, she said.
The three factories make system chips, which combine memory and processor functions on a single piece of silicon, for digital consumer electronics and communications gear. NEC spokesman Dan Mathieson also said it's difficult to assess how much NEC will be able to curb overall production.
TDK's Forecast
TDK is still in the process of determining its earnings projections for the rest of its current business year, said company spokesman Nobuyuki Koike, adding that ``obviously the situation is very difficult.''
TDK's group net income fell 91 percent to 1.2 billion yen in its fiscal first quarter ended June 30, from the year-ago period.
NEC, the third-largest chipmaker, last week forecast a group net loss of 220 billion yen for its fiscal year that began April 1, after earlier projecting a 110 billion-yen profit. The company cited a deepening slump in demand for chips used in computers, mobile phones and other electronic devices.
``With the terrorist attacks, it isn't at all clear what will happen to orders in the coming months,'' said Masahiko Ishino, an analyst with Tokyo-Mitsubishi Securities Co., who rates Fujitsu's shares ``neutral'' and TDK's ``neutral minus.'' ``I think it's better that they stop production for a while.''
Yuzuru Sato, an analyst at WestLB Securities Pacific Ltd., said he will cut his August profit projection for TDK, whose stock he currently rates ``underperform.'' ``The company will fall way below the forecast,'' he said. ``The economic environment has gotten even tougher since August.''
TDK's shares, which have lost 55 percent of their value this year, fell as much as 160 yen, or 3.2 percent, to 4,900 yen.
Fujitsu, which is down 44 percent this year, rose as much as 32 yen, or 3.4 percent, to 979 yen. NEC shares rose as much as 53 yen, or 5.7 percent, to 983 yen. |
