TOKYO NEC Electronics and Renesas Technology Corp. each reported weak results for the first quarter that commenced here in April.
Japanese chip companies had expected that digital consumer applications would lift the semiconductor business, but that market slowed late last year and has not recovered.
NEC Electronics revised its business forecast downward earlier this month (July 6). Both actual sales and profits declined from a year ago. Earnings declined 21 percent to ¥140 billion (about $1.2 billion), with a net loss of ¥6.3 billion ($56 million). Only the auto electronics sector remained stable year over year.
Other sectors, including digital consumer electronics dropped by 2 percent. The largest drop of 41 percent was in communications, 23.4 percent for computer and peripherals and an 18 percent drop in digital consumer sales.
NEC Electronics said it expect silicon cycle to bottom out in July, but it added that it will take several months to fully recover. Based on revised figures, the company expects an annual sales decline of 2 percent ¥695 billion and a 66 percent drop in net profit to ¥5.5 billion from the previous year.
Renesas also ended its first quarter with declining sales totaling ¥220.7 billion (about $2 billion), a 14 percent decline from the year before. Before-tax profits declined ¥6.9 billion (about $61 million). Renesas was in the black a year ago, with ¥10.2 billion (about $91 billion) in before-tax profits.
Satoru Ito, president and CEO of Renesas, said in May that the current fiscal year would be tough, especially the first half of the fiscal year, with almost no operating profit.
The poor results for Renesas, which were mainly attributed to slumping sales of microprocessors and price erosion, were apparently expected as part of the chip maker's business plan.
Renesas had planned to ramp up its 1-Gbit AG-AND flash memory since April, and had expected the flash device would be one of its most profitable products. Production has not ramped up fast enough to contribute to first quarter results, a Renesas spokesman said.