Re: Japan's big five chipmakers.
One consistent pattern among investors is to avoid cognitive dissonance (a much abused concept). Thus news stories consistent and explanatory of a market tone are exhibited often with little debate.
The CNET article about Japan's chipmakers was matched by a Bloomberg story tonight. Some of the differences between the two, are highlighted below. These distinctions mostly consist of a more upbeat tone/silver linings in the Bloomberg text...and the contradiction to CNET's reporting of Fujitsu's spending.
The CNET article, which portrays an environment of contraction for the foreseeable future, is perhaps as revealing at this juncture as the 'up-cycle through 2003' articles reflected the blind optimism of last spring. A CNET-type of story could only appear if willing eyes are available - if it is consistent with what everyone 'knows to be true'.
And markets invariably hate a consensus.
IMO, prudence lies in pursuing sectors where we're told daily just how bad things are (equipment stocks) as opposed to those groups (biotechs, for example) where the general story line is almost as upbeat as last year (even though the vast majority of BT stocks have crashed much harder than the AMATs, KLACs, VECOs etc..)
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Hitachi to Join Rivals at Home, Cut Chip Spending 20%
By Minoru Matsutani
Tokyo, March 16 (Bloomberg) -- Hitachi Ltd. will spend about 20 percent less on its semiconductor business next fiscal year, saying inventories at makers of personal computers and digital products may remain high until at least September.
``If chip market conditions continue to slump in the second half of next fiscal year, we may cut spending further,'' Hitachi spokesman Seijin Shiraishi said in an interview.
Hitachi will delay most of its spending until the second half of the year and may cut back even more unless demand recovers. Japan's third-largest chipmaker joins rivals Toshiba Corp. and NEC Corp. in scaling back investment to account for slack demand for everything from desktop computers to servers, an approach some analysts say lacks foresight.
``Japanese chipmakers are making a mistake by cutting spending but they're afraid of doing anything different from their domestic rivals,'' said Yoshihide Ohtake, an analyst with Tsubasa Research Institute Ltd. ``Capital expenditures should constantly rise because it should depend on product development plans, not on earnings.''
Hitachi's plan to reduce spending on chips, which account for 10 percent of total revenue, comes as inventories at PC makers mount. Compaq Computer Corp., the biggest PC maker and one of Hitachi's customers, yesterday reduced its profit forecast for the first quarter as sales slow and said it will cut jobs.
In October, Hitachi said it would spend 204 billion yen ($1.7 billion) on its chip business this fiscal year. Based on the company's expected 20 percent reduction in spending, capital expenditures on chips will total 163 billion yen in the year ending March, 2002.
Hitachi's shares fell 22 yen, or 2.3 percent, to 950. The shares have fallen 6.7 percent since Jan. 1 compared with a 13 percent decline in the 153-member TOPIX Electric Appliances Index, which includes Hitachi rivals Sony Corp., Fujitsu Ltd., NEC and Toshiba.
Spending Plans
Hitachi's spending plans mirror those of its Japanese rivals. Toshiba, the second-largest chipmaker, said it will probably spend between 140 billion and 150 billion yen on semiconductors in the next fiscal year. NEC, the No. 3 chipmaker, will spend 174 billion yen on chips in the coming year, an amount based on an expected 20 percent cut in spending.
Even as Japanese chipmakers retreat, Intel Corp., which earlier this month warned earnings will fall short of expectations in the first quarter, is pushing ahead with plans to spend more on chips. The No. 1 chipmaker plans to spend $7.5 billion this calendar year, 12 percent more than the year-ago period.
Toshiba and NEC cut their profit outlooks last month because the slowing U.S. economy led computer and digital appliance makers to buy fewer chips.
Hitachi's Shiraishi said operating profit at Hitachi's chip business this year will fall short of its previous 97 billion yen profit forecast. Even so, the outlook won't be scaled back enough to warrant a public announcement, he said.
Korean chipmaker Samsung Electronics Co. also joins Japanese companies. The fourth-largest chipmaker said it may cut semiconductor investments by 18 percent to 6.6 trillion won ($5.1 billion) this year from last year.
Fujitsu
Not all of Japan's chipmakers are cutting spending. Fujitsu, Japan's fourth-biggest chipmaker, will spend ``about the same or a little less'' on investment in the year through March 2002, Kazunari Shirai, executive vice president of the electronic devices group at Fujitsu, said in February. Chip spending will total 220 billion yen this fiscal year.
The company will boost production of flash memory, chips typically used in mobile phones, digital cameras and other devices, while cutting spending in other areas. That's won praise from analysts who say chipmakers should be investing now in anticipation chip sales may rise in about six months.
``Fujitsu's approach is right because now is a good chance to broaden market share,'' Tsubasa's Ohtake said.
For the six months starting September, Hitachi will invest in Hitachi Nippon Steel Semiconductor Singapore Pte. Ltd., a subsidiary which makes dynamic random access memory chips, the main memory in personal computers, Shiraishi said.
The company's investment at its subsidiary will be in 0.13 micron processing technology, which is designed to shrink chip size.
quote.bloomberg.com
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