Japanese microchip maker NEC Electronics Corp said on May 14 it would likely lose money for a third straight year, hit by falling prices and unit shipments. NEC Electronics, 70 percent owned by NEC Corp, has suffered amid tough price competition, while its resources remain spread thin among many different products.
The company, the world's 12th largest chip maker in 2006 according to Gartner Dataquest, said it hopes to become leaner and aim for long-term growth by closing outdated production lines, cutting salaries and focusing more resources on chips for cars and audio-digital products.
NEC Electronics forecast a net loss of 15 billion yen ($124.8 million) for the business year to March 2008. That compares with a consensus estimate of a 7.21 billion yen loss by 15 analysts polled by Reuters.
The company is hoping for a recovery in the second half of the business year on demand from the Beijing 2008 Olympics and growing demand for liquid crystal display drivers used in big flat-screen TVs, executives said.
In operating terms, the company expects to break even this year, from a 28.56 billion yen loss in the year ended March.
"Our outlook is based on the worst-case scenario," including an assumed yen-dollar rate of 115 yen to the dollar," NEC Electronics President Toshio Nakajima said at a news conference.
"We hope to post an operating profit this year, but given the risks that are out of our control, we are being conservative in our forecasts," he said.
For the year ended March, its net loss totalled 41.5 billion yen, compared with a 98.20 billion yen loss a year earlier and smaller than a market consensus of 44.04 billion yen.
The microchip industry has witnessed slumping prices, fuelled in part by a price war between industry leaders Intel Corp and Advanced Micro Devices Inc Prior to the announcement, NEC Electronics shares closed unchanged at 2,815 yen, compared with a 0.6 percent rise in Tokyo's electrical machinery sub-index.