The Wall Street Journal-20080122-Business Technology- Fujitsu Moves To Split Off Chip Business
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Business Technology: Fujitsu Moves To Split Off Chip Business
TOKYO -- Fujitsu Ltd. will soon split off its operations for large- scale integration, or LSI, chips, becoming the latest major Japanese electronics conglomerate to distance itself from the pricey semiconductor business.
In a move seen by analysts as the first step in a joint venture or sale of its chip business, Fujitsu said it will form a subsidiary in March, then transfer its chip research and development and other operations in Tokyo to its Mie plant in central Japan. It expects the moves to cost 10 billion yen, or about $90 million, and be completed by September.
Like many of its peers in Japan, Fujitsu is wary of competition and costs involved in semiconductors, which have become a noncore business. While the company makes hardware products including PCs, network equipment and components, it generates the bulk of its profits from its software and consulting business.
Fujitsu faces losses at its chip business, and is also struggling with price declines in products and trying to refocus its sprawling operations. The company forecasts net profit will fall almost 40% to 65 billion yen this fiscal year through March, even as revenue nudges up to 5.4 trillion yen. About 10% of revenue comes from its semiconductor operations.
"Fujitsu had been injecting funds [into semiconductors] from its IT business, and management has seen that this is not healthy," said J.P. Morgan analyst Yoshiharu Izumi. The company has long worked closely with Toshiba Corp., one of the world's largest chip makers. Toshiba has been aggressively expanding its semiconductor operations, signing deals last year to purchase chip-manufacturing lines from Sony Corp. and sell semiconductors to Sharp Corp. for liquid-crystal display TV sets.
Fujitsu's shares ended down 1.7% at 714 yen, outperforming the Nikkei 225 Stock Average, which fell 3.9%.
