TOKYO Renesas Technology Corp. reported that sales for the first half of its 2005 fiscal year fell 10 percent to ¥ 439.3 billion (about $3.7 billion), with a net loss of ¥ 2 billion yen (about $17 million). The company expects full fiscal year sales to fall 8 percent short of its original target along with a net loss.
Renesas' poor showing follows a big loss by rival Japanese semiconductor supplier NEC Electronics, whose CEO Kaoru Tosaka stepped down as a result.
"For results in the third year since the company’s founding, it is a depressing result," said Susumu Ito, president and CEO of Renesas.
Japan's semiconductor market is stagnant. The World Semiconductor Trade Statistics (WSTS) revised its original growth forecast for the Japanese market from 3.3 percent to 2.8 percent in its latest forecast in October.
"About 60 percent of our sales come from the domestic market. We have to develop our business more globally. And we have to be more cost-competitive," said Ito.
Ito attributed the stagnant results mainly to greater than expected price erosion. "Price erosion in flash memory had a big impact. We estimated prices to drop 30 to 35 percent but they actually plunged about 50 percent," he said.
Renesas' LCD driver business, which contributed to most of the company’s profit in the last fiscal year, also suffered from a big price drop, scarcely registering a profit the first half of the fiscal year.
While WSTS has announced a bullish forecast for the semiconductor market next year, Renesas is not optimistic about its business. The company does not expect sales to plunge but neither anticipates strong upward momentum.
"Even if sales volume increases, big price drops would negate the increase," Ito said. "A mild recovery next year and a bit stronger upturn in 2007 is what we expect for our business," he said.
Renesas expects to invest about ¥ 80 billion yen this fiscal year, mostly to complete a 300-mm line addition to a process line formerly belonging to Trecenti Technologies Inc.