Mitsubishi to cut capital spending

06/01/1998

Mitsubishi to cut capital spending

Expecting huge losses in its chipmaking business for the previous fiscal year, Mitsubishi Electric, Tokyo, will cut FY98 capital investments to 50 billion yen, down from 90 billion yen last year, and undergo a major restructuring that will see DRAM production slashed. In addition, two fab lines will be shut down this fiscal year.

The moves come as president Takashi Kitaoka submitted his resignation, effective this month, one year short of his seven-year term. President since June 1992, he will be replaced by semiconductor business newcomer Ichiro Taniguchi, currently executive managing director of the firm`s Electronic Systems Division, which manufactures defense apparatus for the Japan Defense Agency and space-related equipment. Kitaoka will also resign as chairman of the board, and become an advisor to the company. His unusual departure comes shortly after several other key semiconductor executives resigned to take positions with supplier firms.

The resignation comes as Mitsubishi seeks to manage the semiconductor division`s estimated 60 billion yen ($461 million) deficit for the previous fiscal year. When subsidiary operations are included, the consolidated loss for the semiconductor group is expected to total 90 billion yen ($691 million), according to company sources.

In FY98, Mitsubishi plans to shut down two semiconductor wafer processing lines in its Kumamoto Works and one in its Fukuoka Works. Monthly production capacity of 64-Mbit DRAMs will drop to the one million chip/month level from the current level of 4 million. The company is also reportedly planning to shut down its chip assembly line in Europe. According to the Nihon Kogyo newspaper, the move will result in the loss of 150 jobs.

In FY98, the firm expects to reduce the loss on semiconductor operations to the 40 billion yen level ($307 million). Semiconductor sales for this fiscal year are expected to total 510 billion yen; the company is forecasting revenues will rise to 540 billion yen ($4.15 billion) next year, and to 600 billion yen by FY00.