Japanese Chip Makers Report Full-Year Losses

Two of Japan’s biggest dedicated chip makers, NEC Electronics and Elpida Memory, dropped into the red in the past fiscal year, they said Tuesday.

NEC Electronics, in which NEC holds a controlling 70 percent stake, said both sales and profits fell in the fiscal year from April 2005 to March 2006 on the back of significant declines in sales of chips for cell phones and communications products.

Saturation in the Japanese cell phone market pushed down demand for system LSIs (large scale integrated circuit), and while demand for LCD driver chips rose, it was offset by lower prices, the company said. Sales of chips for servers and workstations also fell sharply and hit the results.

NEC’s net sales for the year were 646 billion yen (US$5.5 billion), down 9 percent from the previous year, and net income showed a loss of 98 billion yen against a profit of 16 billion yen a year earlier.

The poor results were not a surprise. NEC Electronics lost money in each quarter of the year and also saw sales drop on a year-on-year base in the first three quarters of the year. However, sales rose in the fourth quarter, and the company said this represents a turnaround in the semiconductor sales cycle that will continue.

For the fiscal year that begins this month, the company expects sales to recover almost all the ground lost in the previous year and rise 9 percent to 705 billion yen. It also expects its net loss to improve to 5 billion yen.

Elpida Memory said sales increased 17 percent from the previous year to 242 billion yen, while income dropped to a loss of 4 billion yen from a profit of 8 billion yen in the previous year.

Demand for Elpida’s dynamic RAM (DRAM) computer memory chips was strong, but lower prices wiped out gains, especially for chips used in servers, with sales down 13 percent, it said. In the consumer electronics segment, demand for memory chips remained strong and rose through the year, Elpida said.

For the new fiscal year, Elpida said it sees demand for DRAM chips expanding, especially with the upcoming launch of Microsoft’s Windows Vista operating system. The company, which aims to become a global top 3 DRAM maker, did not announce financial forecasts for the year.

-Martyn Williams, IDG News Service

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