TOKYO Sanyo Electric Co. Ltd. will accelerate its three-year revitalization project by cutting 10,000 jobs by January 2006, two-thirds of the 15,000 job cuts originally planned to take place by fiscal 2007.
Reporting the progress of its three-year reform plan Wednesday (Sept. 28), chief executive Tomoyo Nonaka said Sanyo intends to complete the first phase of the project by the anniversary of the company's founding on Feb. 1.
During the first phase, Sanyo plans to cut costs by ¥170 billion ($1.5 billion).
Out of the planned 10,000 job cuts, about 1,400 employees will be transferred out of the LCD joint venture with Seiko Epson Corp. Another 1,500 positions will be cut at Sanyo's semiconductor operations.
Sanyo president Toshimasa Iue conceded a big shrinkage in Sanyo's semiconductor operation. "We chose this way, which will enable Sanyo's semiconductor business will survive even if the semiconductor business shrinks to ¥200 billion ($1.8 billion)."
Sanyo's semiconductor business peaked at ¥263 billion ($2.3 billion) in fiscal 2003 but dropped to ¥217 billion ($1.9 billion) in fiscal 2004 after an earthquake directly hit its main fab in Niigata last October.
Of Sanyo’s three semiconductor fabs, its main Niigata fab was seriously damaged by the earthquake. Sanyo reduced the five lines of the original fab to two this past March, with a total capacity reduction of 30 percent.
Along with reforming the main fab, Sanyo has also closed several front- and back-end assembly operations. To make its semiconductor business profitable, Sanyo will focus on ASSP products for audio/video and power applications.
"We have to make the semiconductor business profitable," said Iue. By focusing on ASSP products, Sanyo intends to make the business that fell into the red after the quake profitable within the forth quarter of the current fiscal year.
Sanyo has revised its business forecast for the current fiscal year downward from the original forecast last April.
Though Sanyo still expects its current fiscal half-year sales to be ¥1.17 trillion ($10.4 billion), the company has revised its ¥9 billion ($80 million) operating profit to a ¥5 billion ($44 million) loss.
For the full fiscal year, sales are expected to drop by ¥50 billion ($442 million) to ¥2.44 trillion ($21.6 billion), with the operating profit dropping to ¥18 billion ($159 million) from ¥65 billion ($575 million).
Drastic price erosion and damage from last October’s earthquake are still negatively affecting business, Iue said.