TOKYO -- Japanese electronics giant NEC said on Friday it would plunge deep into the red in the first half of this business year, succumbing to a global chip slump and joining the long list of industry peers that have issued harsh loss warnings.
Japan's biggest semiconductor maker said it expects to post a group net loss of 20 billion yen (US$151 million) in the six months to September -- its first loss in five years -- compared with a 35.7 billion yen ($270 million) profit in the same period a year earlier.
NEC's stronghold, the electronics devices devision, will suffer an operating loss of 2 billion yen ($15 million) in the first half, compared with a 50 billion yen ($378 million) profit a year ago, managing director Shigeo Matsumoto said.
Weak prices of DRAM chips sparked a slide in the prices of other types of semiconductors, weighing on its earnings, Matsumoto said. Economic woes at home have also made companies reluctant to spend money on telecommunications equipment and machinery, two areas of business which last year buoyed NEC's growth.
"A delay in an economic recovery at home and in Asia had a profound impact on our business," Matsumoto said at a news conference.
Matsumoto said NEC aims to return to profitability in the second half through restructuring steps, cuts in spending, and a shift in emphasis to the lucrative business of systems integration. Among the measures NEC announced: a 5 percent cut (6,000 employees) in its work force over the next three years through attrition; a reduction in research and development spending; and a pay cut for executives on its board of directors by 6 to 10 percent.
NEC also said it would consolidate its global semiconductor assembly and packaging operations, moving operations in Malaysia to an existing facility in Singapore and those in Ireland to a plant in Britain.
NEC's loss warning follows those of Hitachi, which recently forecast an annual loss of 250 billion yen ($1.9 billion), and Toshiba, which said it will be fortunate to break even.
NEC's Matsumoto said its troubled US-based PC making unit Packard-Bell NEC, which NEC brought fully within its own camp in July, dragged down NEC's half-year profit by 10 billion yen ($76 million). NEC injected $225 million in its latest round of financial support to Packard Bell, boosting its stake in the company to 52.81 percent from 49 percent.
