Nikon Corp will fall short of its sales target for chip equipment this business year and expects no growth in the following year as semiconductor makers remain cautious about spending, the company's chief executive said on Tuesday. In an interview with Reuters, Shoichiro Yoshida also unveiled plans to bolster profit margins in its digital camera division by increasing output of high-end models and narrowing its pool of parts suppliers to cut procurement costs by 20 percent.
Nikon is enjoying a strong earnings recovery thanks to a recent upturn in the stepper market, but some analysts have questioned whether it can maintain that momentum given a cloudy outlook for chip spending and digital camera demand.
Nikon is one of the world's three top makers of steppers, which are multi-million dollar machines used to map circuitry onto chips and liquid crystal displays (LCD). Its rivals are Netherlands-based ASML and Canon Inc.
Yoshida said Nikon now expects to book sales of about 200 chip steppers in the year to March 31, below its forecast for 210 units, largely because it will take longer than initially expected to set up some of the machines at customers' plants.
Nikon said the shortfall was not due to cancellations, adding it was not unusual for its forecasts to be slightly off as some sales are recorded after the machine is installed and tested, making it hard to predict the exact timing of the sale.
Shares of ASML, which said last week it does not see a sharp increase in chip demand and that low capacity utilisation at its customers made the outlook uncertain, fell 0.76 percent to 13.02 euros in Europe, mirroring weakness in other tech shares.
"We see the (overall) chip stepper market falling about 20 percent in calendar 2005 to around 450 units," Yoshida said, noting that about 560 units were sold last year. "But we expect our share of the market to rise on the back of new models."
Yoshida expressed confidence Nikon would win the war with ASML in next-generation "immersion technology", which uses a layer of water between the lens and the silicon to improve depth of focus and resolution, allowing for finer circuitry.
ASML plans to deliver high-volume versions of these machines in early 2006. Yoshida said Nikon, which claims its immersion machines under development are more advanced than ASML's, would have its model on the market by the end of this year.
"I don't expect this to produce high unit sales initially but I believe this will be a flagship model for us and help us take a lead in the market," said Yoshida, credited with developing Japan's first stepper about 25 years ago.
According to industry data, ASML held more than half of the market for chip steppers last year in value terms, well ahead of Nikon and Canon. ASML is not a player in the LCD stepper market, which is controlled exclusively by Nikon and Canon.
The 72-year-old Yoshida said Nikon would likely beat its forecast for LCD steppers in the current business year, predicting sales of 87 or 88 machines. In February it had forecast 85 units, up from 52 units in 2003/04.
Yoshida also said he was now slightly more optimistic about demand for LCD equipment in the next financial year starting April 1, estimating sales would fall about 25 percent, compared with Nikon's prior forecast for a decline of about 30 percent.
"Initially we were relatively pessimistic about the next fiscal year, expecting the market to drop by about 30 or 35 percent, but Taiwan makers and others have started to show interest so now we don't see a drastic downturn."
Yoshida also sounded a positive note on the digital camera business, saying Nikon would aim to ship 7.5 million digital cameras in 2005/06, which would mark a rise of 14 percent compared with its target for 6.6 million units in 2004/05.
He was especially upbeat about the prospects for high-end digital single lens reflex (SLR) models, which fetch juicier profit margins than compact cameras. Nikon plans for digital SLR shipments to jump 50 percent to 1.5 million units next year.
Boosting digital SLR sales is central to Nikon's strategy of shifting away from the low-end of the market where pricing pressure is fiercest. Falling prices of compact models is the main reason profits in the company's camera division are expected to fall in the current business year.
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