Japan cuts capital spending, but chip market fares better
By Jack Robertson
EBN
(03/16/01 17:34 p.m. PST)
WASHINGTON -- Major Japanese electronics companies are scrambling to lower their March 31 fiscal year-end sales and profit projections as the country's economic crisis deepens. But in what could be a global market dichotomy, semiconductor purchases in Japan for the coming year may fare better than in most other regions.
Among those lowering net earnings estimates for the fiscal year are Fujitsu, which is expected to see income drop 77%, to $85 million; Hitachi, which expects to be down 20%, to $830 billion; and NEC, whose $500 million in anticipated earnings represents a 33% year-over-year decline.
Matsushita Electric Industrial Co. Ltd. trimmed its operating profit estimate 15%, to $1.8 billion. And Toshiba Corp., which expects net income to drop 29%, to $800 million, revised its fiscal year semiconductor operating income up 21%, to $1.1 billion, although it lowered projected chip sales 5%, to $9.3 billion.
With so much bad news for fiscal year-end sales, companies were loath to make predictions for the coming fiscal year. However, Toshiba president Tadashi Okamura said in a statement that the company's performance in the upcoming fiscal year will depend on the duration of the electronics industry's inventory glut.
Okamura said projections that excess chip inventories will be burned off by the end of this quarter were off the mark. “It's anybody's guess, but in the worst case, inventory adjustment could take until the end of the [calendar] year,” he said.
However, even if Japanese chip production turns down, the country's demand for semiconductors is expected to grow slightly in calendar 2001, according to at least one forecast.
Jim Feldhan, an analyst at Semico Research Corp., Phoenix, projected semiconductor consumption in Japan this year will inch up 2%, to $47.7 billion, compared with an expected 2% decline in the global chip market, to $199.9 billion.
Feldhan said that, despite the growing economic crisis, some Japanese electronics markets have remained stronger than in the United States, specifically PCs, consumer electronics, digital cameras, electronic games, peripherals, and embedded microcontrollers.
“Japanese semiconductor consumption didn't mushroom as large as in the U.S., but then it's not falling back as sharply as the U.S. market,” he said.
Intel Corp. president Craig Barrett, whose company benefited from a 21% jump in PC sales in Japan in 2000, agreed that processor sales to Japan this year might be better than in other regions. “The country is in no great shakes right now, but it's still pumping along in the PC market,” he said.
The most immediate impact of Japan's financial slump is an estimated 24% cut in semiconductor capital spending this year, to $10.7 billion from $14.1 billion in 2000, according to Morgan Stanley Dean Witter & Co.
That could affect the future technological competitiveness of Japanese chip makers, as Morgan Stanley predicts U.S. semiconductor capital spending will decline only 4% this year, to $20.3 billion. Capital investments by Korean companies, meanwhile, are expected to drop by 9%, while Asia-Pacific companies will trim their budgets by 6%, the firm said.
For the coming fiscal year, Morgan Stanley estimated Fujitsu's semiconductor capital spending will drop 22%, to $1.5 billion, although a Fujitsu spokesman said the company hopes to hold spending levels steady. Hitachi is pegged to chop capital spending by 35%, to $1.2 billion, and Mitsubishi Electric's $1 billion budget will be 23% below last year's levels. NEC and Toshiba are projected to cut spending by more than 20%, to $1.5 billion and $1.2 billion, respectively.
However, Semico analyst Sherry Garber said Japanese suppliers are trying to mitigate the effects of large capital spending cuts by outsourcing more chip production to foundries. She said Japanese chip companies have already reduced their exposure to the volatile DRAM market. Japan's chip makers are expected to take an 8% revenue hit, down to $3.9 billion, compared with global DRAM revenue, which is forecast to decline 11%, to $25.7 billion. |
