JAPAN NEWS: Ulvac bets on Obama, temps taking brunt of chip slump

Jan. 20, 2009 – Scanning recent headlines across Japan: Ulvac is betting on a solar boost from Obama; Japan’s temp chip workers are seeing pink as their firms bleed red; and consolidation takes hold in two segments of the domestic semiconductor sector.

Ulvac bets on Obama’s green leanings

Ulvac is hoping to make inroads in the US, backing that it will be a beneficiary of new clean energy policies forthcoming from president-elect Barack Obama, according an interview with company president Hidenori Suwa in the Nikkei daily.

Solar panel manufacturers are predictably suffering with everyone else during these times of financial crisis and strong yen, and business in Europe in particular seems to be flagging, but he told the paper that “enthusiasm for the technology is mounting in the US.” He predicts orders will “soar” once the markets return to normal, and specifically cited Obama’s clean energy policies as a catalyst for new orders.

Asked about the likelihood of increased competition in what is universally seen as a high-growth potential market, Suwa pointed to the company’s “turnkey” products that will get customers supplying solar cells “as quickly as possible.” He acknowledged that solar cell toolmakers’ fluctuating earnings are heavily dependent on customers’ capex, so to remove that uncertainty “we need to change our business model,” including inroads into materials handling (e.g. sealants), and services such as recycling. the goal is to boost these new ventures to 20%-30% of overall sales in five years from the current 10%, he said.

Top chipmakers eyeing ¥500B losses, layoffs

Japan’s top chipmakers are bracing to post a collective ¥500B (US $5.51B) in operating losses for the fiscal year ending in March 2009.

Not surprisingly, Toshiba has been hit hardest thanks to its exposure in both memory and system chips, likely to post in excess of ¥200B ($2.2B) for the year, notes the Nikkei daily. Elpida (¥100B/$1.1B) also is suffering from slumping DRAM prices. NEC Electronics is likely to post “several dozen billion yen” in losses, instead of the anticipated ¥1B ($11M) profit. Fujitsu, meanwhile, is suffering from its own woes in the auto sector, another generally hard-hit sector in these sluggish macroeconomic times.

One perceived way to stop the bleeding is to cut temporary workforces before the end of the fiscal year. NEC plans to lay of 1200 temps by March 32, and Toshiba is eyeing 1000 similar job cuts. So far, though, Renesas (roughly $yen;100B/$1.1B) is the only firm to have started cutting into its full-time workforce — it has already taken steps to lay off 300 workers (3% of total in Japan) and offer severance packages before fiscal year’s end, in addition to another 1000 or so temp workers. In total, job losses in Japan’s semiconductor industry could reach 7000 in just the three months from Dec-March, notes the Nikkei.

Asahi Kasei taking on Toko’s chip biz

Chemical supplier Asahi Kasei is buying the chipmaking business of Toko in a bid to find a long-term growth engine. The pricetag for 80% of Toko is a reported “several billion yen;” Asahi would purchase the remaining 20% over three years.

Toko is selling the unit encompassing power chips for cell phones and PCs in order to focus on industrial coils, and has been under pressure from US-based major shareholder Bel Fuse for such a move, notes the Nikkei daily. Toko is expected to post a loss of ¥2.2B (US $24M) on sales of ¥4B (~$152M) for the year ending in March 2009.

Asahi aims to fold Toko into its EMD unit that makes electronics parts and materials to offer another growth area in addition to chemicals and medical equipment, an area in which it has already shifted resources from other areas such as petrochemicals, notes the Nikkei daily. The company also gains inroads into foreign markets (notably sales networks the US and Europe), a significant benefit since 75% of its sales are currently domestic, notes the Nikkei Business Daily. Asahi’s electronics sales should total roughly ¥118B ($1.28B) over the past year.

Hitachi launches affiliate takeover bids

Hitachi is fighting off the slumping times by intensifying corporate synergies, by placing tender offers to affiliates Hitachi Kokusai Electric (electronics equipment, including diffusion furnaces for semiconductor manufacturing) and Hitachi Koki (power tools) into subsidiaries. Tender offers for both firms, to raise Hitachi’s stake from 32%-37% to 51% in each, would cost about ¥26.7B (roughly US $300M).

The goal of the combination is to integrate and leverage opportunities in broadcast/telecom (Kokusai) and batteries (Koki), but also boost the books. Hitachi sees a group profit of ¥410B for the year, but just a ¥15B net profit, due largely to dividends paid to minority shareholders, notes the Nikkei Business Daily. Turning those subsidiaries into wholly-owned units will “stanch the profit hemorrhage,” the paper notes.

Another possible explanation, the paper says, is that Hitachi could be strengthening its balance sheets in order to attract more funding. “Unlike the Mitsubishi and Mitsui groups, Hitachi does not have core lenders that provide operating funds. As a result, those with strong businesses must go public and raise money in the market.”


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