TOKYO -- Two months after announcing a wide-ranging restructuring, NEC Corp. today said it expects to report a net loss of $1.2 billion for the current fiscal year, ending March 31, 2002. The company also said it will postpone equipping a joint-venture 300-mm fab planned by Elpida Memory Inc. (see today's story).
NEC officials said the company is now planning to cut more than 300 additional jobs during the next six months.
The revised net-income projection diverges sharply from NEC president Koji Nishigaki's statement last spring that NEC would see a net profit of $544 million this year. In releasing the new forecast today, Nishigaki blamed the staggering difference on the deteriorating U.S. economy in the wake of the Sept. 11 terrorist attacks, and the $837 million restructuring for NEC Electron Devices.
"When we made our last estimates, that was before the terror attack happened. Over twomonths the situation has dramatically changed," Nishigaki told reporters at a press conference here.
"We are adopting a very conservative outlook about the prospects-and regarding the United States, you know there is going to be an impact," he said.
Accordingly, on top of closures and 4,000 job cuts announced for Electron Devices in July, NEC has pushed back equipment installation at Elpida Memory's 12-inch, 22,000-square-meter Hiroshima fab from
this December to September 2002, said Kanji Sugihara, the president of NEC Electron Devices.
"The investment has been put on hold until we see some positives in the market," Sugihara said. He emphasized that both NEC and Hitachi Ltd. remained committed to spending the $1.34 billion capital expenditure the companies earlier assigned to the fab.
Elsewhere, the company will consolidate NEC Micro Systems Ltd., responsible for hardware design for LSIs, and software designer NEC Microcomputer Technologies Ltd. in January.
"The acceleration of the company's restructuring plan is a welcome development that should have a significant positive impact on profitability next fiscal year," said Scott Foster senior research analyst for technology at Lehman Brothers Japan.
"However, by postponing its 300-mm wafer fab, Elpida risks losing its ability to compete against Samsung, Micron and Infineon. This in turn could lead to more write-offs in the future," Foster said.
Nishigaki also disclosed more details about the impact of ongoing restructuring, a process he promised to "speed up."
In addition to cutting 300 more jobs, NEC will also close its LSI Memory Operations Unit and halve capacity at NEC Semiconductors (UK) Ltd. NEC Electronics Inc.'s Roseville, Calif., fab will cut monthly capacity from 25,000 to 14,000 six-inch wafers by March 2002.
The restructuring announced in July will lead to a 15% reduction in wafer-processing capacity by March 31, Nishigaki said.
Consolidation of non-Japanese plants will cut costs, while a domestic reorganization will concentrate fabs into specific tasks, he continued. The company's Singapore, Malaysia and Indonesia fabs will become the main assembly and test plants, with the Singapore factory taking over the functions cut at the U.K. and Roseville facilities. In Japan, fabs at Yamagata and Kyushu will concentrate on system-LSI test and assembly, and the company's Kansai plant will assemble and test general-purpose ICs and discretes.
Executives characterized this latest shakeup as a response to the worsening condition of the global semiconductor market following the events of Sept. 11.
Over the summer, Sugihara talked up the prospect of a faint recovery in U.S. PC demand. Those hopes have wilted. Sugihara now predicts the global semiconductor market will shrink about 30% from last year and grow between 0-to-10% in 2002.
"The terror incident will prolong a general IP intellectual-property slump because of its impact on demand in the United States," he said. "America comprises 40% of the world's semiconductor market, and there could be an extra drop of 10% in demand because of the terror attack."
But even as it cuts some jobs, NEC is also investing in personnel, boosting its sales force for system LSIs from 150 to 400 people and adding 100 employees to software sales, he added.