Thursday December 11, 2008

Chipmakers including TSMC, Chartered Semiconductor, SMIC dealt series of blows from global economic slowdown

ft.com :

The rapid loss of consumer confidence is starting to take its toll on the global technology industry, and nowhere is this more evident now than among chip manufacturers. This was underscored when Taiwan Semiconductor Manufacturing Co, the biggest contract chipmaker, issued its first cut in sales and profit forecasts in 7 years. TSMC, which commands more than half the global market for contract chip-making, said revenues in Q4 2008 could be up to 11% less than forecast.

While the woes in the semiconductor industry after the tech bubble collapsed were mainly due to over-expansion by producers, this time the trouble stems from a sudden fall in demand from the end-users of digital products. Morgan Stanley analyst Bill Lu points out that "demand continues to deteriorate and thus inventory levels are not coming down as fast as expected." This is particularly bad news for smaller players such as Chartered Semiconductor Manufacturing in Singapore or Semiconductor Manufacturing International Corp in China. Utilisation rates of their factories have dropped to 45% in Chartered's case and around 20% in SMIC's case. Macquarie's Mr Lau says "they may as well just shut down and take a three-month holiday for Chinese New Year".

- The semiconductor industry is the proverbial "canary in the coal mine". You could think of these companies as leading economic indicators. They operate under extreme conditions even in the best of times, with little margin for error. In better times now consigned to history, TSMC had its legendary bonus payouts. We can expect them to continue to lead the way, but this time round the direction is down. The race to the bottom will likely be led by the chipmakers.

See also :

1. Junk bonds : Chartered Semiconductor debt rating lowered to junk By Fitch
2. Chartered Semiconductor salary cut - all employees pay reduced by 5-10% on economic slowdown
3. Chartered Semiconductor forces block leave, stops bus services, mulls 4-day working week

(2008-12-11 22:58:20 SGT) [Biz] Permalink

Sony to cut 16000 jobs as global recession curbs demand

bloomberg.com :

Sony, the world's second-biggest consumer-electronics maker, plans to eliminate 16,000 jobs in the largest reduction announced by a Japanese company since the credit crunch drove the world into recession. Sony will curb investments, outsource production and move away from unprofitable businesses by March 2010 to save more than 100 billion yen ($1.1 billion) a year, the company said today [9 Dec 2008]. The cuts include 8,000 full-time employees and another 8,000 part-time and seasonal workers.

The reductions highlight the severity of the slump in consumer spending at a time when companies typically focus on the peak Christmas shopping season. Sony CEO Howard Stringer said a "much" larger-than-anticipated deterioration in the economy spurred the measures. This is the second round of mass layoffs since 2005, when he announced plans to eliminate 10,000 workers. Panasonic, the world's biggest consumer-electronics maker, cut its full-year profit outlook by 90%. Faltering consumer spending led companies including AT&T and DuPont to announce more than 15,000 job cuts this month. The number of people on jobless benefit rolls in the US climbed to a 26-year high in the week ended Nov. 22.

- If this were a bank, that would have been pretty much par for the course. But this is Sony, and this is the Christmas season. Not good. Making things worse was the initial confusion surrounding this announcement, when it was first announced that the cuts would be 8000 temporary/contract workers and then subsequently we found that it had been amended to that plus another 8000 full-time workers, making for a total of 16000. This speaks to me of confusion among the top ranks. Not good at all.

See also :

1. Sony to cut 10000 jobs
2. Sony to sell ultra-thin OLED TVs this year
3. Toshiba scraps HD-DVD, gives in to Sony Blu-Ray in format war
4. Wave of job cuts across corporate America, mass layoffs well beyond Wall Street

(2008-12-11 09:26:42 SGT) [Biz] Permalink

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