Oversupply and weak demand in the semiconductor industry is strangling Tokyo's Toshiba Corp. It has been widely reported that Toshiba is in talks to
merge part of its chip operations with the semiconductor unit of NEC Corp., the Japanese PC maker that just said it would
cut 20,000 jobs. Industry watchers have their doubt about the deal, though. One analyst told Reuters, "Despite some cost cut impact, it's doubtful if they can beat their international rivals even as a team. The domestic chip industry appears at the brink of death."
In a
presentation, Toshiba had this to say about its semiconductor business: "Besides making our own efforts to restructure, we will study more fundamental restructuring, including the possibility of establishing a separate company."
Toshiba lost $1.8 billion in the third quarter, warned of a record operating loss and said it would
cut costs by $3.3 billion in the next business year. Among a number of moves, the firm will reduce output and research spending for the chip business, cut some temporary employees and postpone new fab construction.
Toshiba also restructured a joint venture with SanDisk Corp. of Milpitas, Calif. They first
talked of a rejiggering the flash manufacturing JV in December. SanDisk will transfer more than 20% of the ventures' capacity to Toshiba. A statement showed the
total value to SanDisk is about ¥80 billion, ($890 million) -- about two-thirds of the total will reduce SanDisk's current equipment lease obligations and one-third will be received in cash.
Toshiba and NEC are not alone in weathering the storm. Japanese corporate cousin Sony Corp. said its net profit for the third quarter
fell by 95%, and Kyoto-based Nintendo Corp.
cut its full-year profit forecast by 33%. -
Baz HiralalRead about the NEC deal talksToshiba to cut costs by $3.3BToshiba, SanDisk restructure JV
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