Chip Makers in Japan See Only Trouble
From today's NY Times
TOKYO, Jan. 28 — Chip makers in other countries, like South Korea, Germany and even the United States, have been saying the skies for their gloomy industry are brightening. But the Japanese see only a false dawn.
Toshiba (news/quote) and Fujitsu are scheduled to announce results on Tuesday for the third fiscal quarter, which ended Dec. 31, and both are expected to be severely downbeat. Toshiba, especially, will be watched, because it is No. 2 in the world semiconductor industry and is expected to lower its outlook sharply for the coming year. Analysts predicted that the downbeat news will set off a wave of lowered forecasts from rivals over the next few weeks.
Some of Toshiba's numbers found their way into the Nihon Keizai Shimbun, Japan's leading business newspaper, a day early. Today, the paper reported that Toshiba now expected to post an operating loss of 130 billion yen ($965 million) for the fiscal year ending March 31, 18 percent worse than the loss it had forecast at the end of October.
Toshiba spokesmen said they would not comment on the news report today, saying the company would wait to meet with analysts and reporters on Tuesday; the absence of a denial was taken here as tacit confirmation of the news report.
The Japanese manufacturers that once dominated the semiconductor industry have lost ground in recent years to more efficient producers in South Korea, like Hynix Semiconductor and Samsung Electronics, the world memory-chip leader, as well as Micron Technologies in the United States. Those companies have reported with some celebration a recent upturn in long-depressed prices for commodity memory chips known as DRAM's and have spoken hopefully of an imminent return to growth and profitability.
But a December surge in consumer spending on electronics seems to have done the Japanese producers little good. Shipments of computers, mobile phones and other electronics are expected to remain soft at least into midyear, analysts said, and any overall recovery in chip prices is likely to be tepid at best.
"The market for chips and computers has not improved, to say the least," said Yoshihiro Shimada, an analyst at ING Barings in Tokyo. "I would expect most other chip makers to revise down their forecasts in the coming 90 days."
Facing mounting losses on commodity chips, Toshiba, NEC, Hitachi and other Japanese companies are taking steps to exit that end of the market and concentrate on made-to- order chips that command higher profit margins, but also require high investment and offer fewer economies of scale. Last month, Toshiba announced a deal to sell its DRAM plant in the United States to Micron and to abandon a planned alliance with Infineon of Germany.
Toshiba is also attacking costs, with plans to eliminate about 10 percent of its work force, or some 19,000 jobs. To pay for that and other steps, Toshiba will probably take a 180 billion yen ($1.3 billion) charge, half again as much as initially expected, analysts and news reports here said.
Analysts also say Toshiba and its rivals will be ratcheting back capital investment in semiconductor operations by an average of 30 percent in the next fiscal year, which begins April 1.
"If Toshiba continues to make the same mistake of over-investing in semiconductors during the next five years, they'll go bankrupt," said Satoru Oyama, who follows Japan's chip makers for Lehman Brothers (news/quote).
Toshiba also faces intense cost pressure on the consumer hard goods side of its business, where it must steadily cut prices on its televisions, refrigerators and other appliances to compete with cheaper imports from China, South Korea and Europe. By refusing to shed these operations, analysts said, the company has spread its resources too thin. |
