Restructuring effort in Japan hampered by culture's values

The technology industry has blown an economic fuse prompting companies worldwide to restructure operations, but a cultural aversion to dumping domestic staff could hamper recovery chances for Japan's high-tech leaders, analysts say.

Over the past month major Japanese electronics firms have said they would axe around 65,000 jobs citing slack demand for technology. But a closer inspection of the figures reveal most reductions will come through natural attrition rather than hard layoffs, with more than 25,000 cuts targeted overseas.

"The best thing to improve efficiency is to cut staff in Japan, because labor costs are high and it is very expensive to run factories here, but this is harder to do, which is why they [Japanese firms] lay off foreign employees," said BNP Paribas consumer electronics analyst Masayuki Yonezawa.

Leading computer maker Fujitsu Ltd said it would slash 16,400 jobs worldwide, or 8.8 percent of its total workforce, by March 2002 -- 11,400 cuts will be made abroad mainly in the Philippines, Taiwan and Vietnam.

"The real problem is in Japan," said Scott Foster, electronics analyst at Leyman Brothers. "But Fujitsu went and made exactly the reverse decision by firing a large number of people overseas, with a large percentage coming from Southeast Asia where labor costs are lower.

"It won't bring Fujitsu a lot of savings."

Kyocera Corp, the world's largest maker of integrated circuit ceramic packages used in computers and mobile phones, made a similar mistake when it announced 10,000 global job cuts that exclude domestic staff, said analysts.

"The figure is larger than we had expected but it is all from abroad. This is because it is much harder to cut jobs in Japan," said BNP Paribas's Yonezawa.

Okasan Securities electronics analyst Kazumasa Kubota agreed: "Companies are simply laying people off [abroad] to protect their profits, but their restructuring plans are short-sighted and smack of a knee-jerk reaction to the bursting of the IT [information technology] bubble."

Late July, NEC Corp said it would shave 4,000 jobs off its global workforce of almost 150,000 this year, reduce semiconductor production at home and abroad and pull out of the DRAM chip business by 2004.

But Kubota said he was disappointed at the size of the scale-down, which reflects an inbuilt reluctance by Japanese companies to lay off staff.

"NEC will have to cut tens of thousands of jobs to endure the ongoing economic downturn," he said. "The demand for semiconductors is weakening ... even when companies cut prices, demand remains low."

Utter desperation at the demise of the global technology industry has finally driven some firms in Japan to compromise domestic employees for profit, but a lingering sense of social responsibility means most jobs will go through natural attrition rather than ruthless cuts here and now, said analysts.

Hitachi Ltd will erase 10,200 jobs at home and 4,500 abroad by March 2002, but most staff will leave of their own accord or through early retirement.