Japanese IC makers reduce FY sales forecast
02/01/1998
Japanese IC makers reduce FY sales forecasts
In financial reports for the first half of fiscal 1997, Japan`s top five chipmakers present a clouded picture, with four of the five firms revising downward their expected semiconductor production levels. Three of the five expect an operating loss for the current FY, which ends in March.
Total capital spending for the group will be unchanged from estimates made at the beginning of the fiscal year. Individual companies are making adjustments, however, with Toshiba adding 20 billion yen ($163 million) to its capital budget, while Hitachi and Mitsubishi are making small cuts (see table).
The downward reductions in output levels for the year are generally linked to continued price declines in the DRAM market. NEC, Japan`s largest chipmaker, now expects semiconductor sales of 1.26 trillion yen ($10.3 billion) rather than 1.3 trillion as originally estimated, while Toshiba revised its revenue estimate to 925 billion yen ($7.6 billion) from 970 billion, and Hitachi cut its forecast to 780 billion yen ($6.4 billion) from 880 billion yen. By contrast, Mitsubishi expects its output to be 10 billion yen larger than expected, largely because it plans to start full-scale production of 64-Mbit DRAMs in the second half.
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As a result, operating profits are expected to again be elusive, as they were last fiscal year. NEC, the only one of the five to show a profit last year, said its first-half operating profit on semiconductors and related fields was 50.8 billion yen ($423 million), and that it expects full-year operating profit to be 110 billion yen ($920 million). Toshiba, the only other top chipmaker to expect a profit this year, said it expects to be about 10 billion yen ($82 million) in the black. Hitachi, Fujitsu, and Mitsubishi all expect operating losses for the year. Exact figures were not made public, except by NEC.
There is a correlation between profitability and the amount of output accounted for by DRAMs. Toshiba and NEC have "memory ratios" of 25% and 31%, respectively, while the other three firms are all in the 38% range. Over time, Japanese companies are working toward adding more "System LSI" devices to their mix, to dampen the effects of DRAM market fluctuations.
NEC is reportedly now measuring its performance less against its Japanese rivals and more against worldwide competitors like Intel and Samsung. While the company does hold the best record of profitability in Japan over the last few years, its profits are well below world levels. Looking at capital investment, both NEC and Fujitsu will stand pat on their spending plans disclosed at the beginning of the fiscal year.
Toshiba, seeking to lessen its dependence on memories, will add 20 billion yen ($164 million) to its spending plans, devoting the new funds to System LSI production lines. Total FY97 for Toshiba will be 170 billion yen ($1.4 billion), equal to FY96.
Hitachi and Mitsubishi will both reduce their expected spending levels by 10 billion yen ($82 million). Hitachi plans to postpone its investment in a Dallas, TX, logic line, while Mitsubishi is freezing its investment in a 0.25-?m line at the Saijo Plant, Shikoku Island, Japan.
With the exception of Hitachi, all the five chipmakers expect FY sales to increase over last year, though not as much as expected. The continued problems with profitability, however, represent a real challenge for the companies involved. With capital spending now more closely tied to profits than in the past, the situation must also be factored into the outlook for equipment sales in Japan.-P.N.D.