Wed, Jul 04, 2001 - Page 17 News List

LG Philips to close plants, fire 1,200 workers

SHUTDOWN Manufacturers seeking to cut costs are moving their factories to China where labor and production are cheaper, and Philips may be joining the exodus

BLOOMBERG , TAIPEI

LG Philips Displays, a venture between Korea's LG Group and Royal Philips Electronics NV of the Netherlands, will close two factories and elimate 1,200 workers in Taiwan as falling demand for computers and competition from flat-panel monitors hurt sales.

LG Philips, which says it's the biggest maker of color picture tubes for televisions and computers, said in a statement that it plans to shut the factories at the end of July, putting 1,000 Taiwanese and 200 overseas employees out of work.

Sales of LG Philips' cathode-ray tubes are "suffering from falling PC demand and replacement by liquid crystal display screens," said Fang Kuo-li, who manages about NT$1 billion (US$29 million) in Taiwan stocks at First Global Investment Trust Co.

"I'm very pessimistic about the future for the sector."

Myriad of problems

Falling world demand for personal computers is cutting sales and profit at dozens of Taiwan's electronics manufacturers, forcing them to cut costs by delaying expansion, shedding workers and cutting production. Unemploy-ment is at a record, and the economy expanded in the first quarter at it slowest pace in more than a quarter-century.

United Microelectronics Corp (聯電), the second-biggest made-to-order chipmaker, said it may close at least one of its nine plants to cut costs. It's left about half its factory capacity unused over the past three months as makers of computers, mobile phones and consumer electronics buy fewer chips.

Mitac International Corp (神達), which makes computers for Compaq Computer Corp and Hewlett-Packard Co, said last week it would fire a tenth of its staff, and said it expects first-half profit to fall by more than a third as it slashes prices to boost sales.

Moving to China

As they seek to cut costs, manufacturers are also moving production from Taiwan to China, where labor and production are cheaper. LG Philips Displays may be joining the exodus, Fang said.

"Labor accounts for a large part of the cost in [cathode-ray tube] manufacturing," Fang said. "It can do that more cheaply in China."

Philips, Europe's biggest maker of consumer electronics, said last week it plans to hand control of its mobile phone-making business to a Chinese joint venture to cut costs. Philips had less than 3 percent of the world handset market last year.

LG Philips said it plans to fire 200 workers at a 26-year-old factory in northern Taiwan that makes monitors for personal computers. It will fire another 1,000 employees at its plant near Hsinchu Science-based Industrial Park (新竹科學園區), which houses Taiwan Semiconductor Manufacturing Co (台積電) and other chipmakers.

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