Tue, May 20, 2008 - Page 10 News List

Chipmaker Renesas says stronger yen cutting profits

BLOOMBERG

Renesas Technology Corp, the world’s largest privately held chipmaker, said profit will decline 6 percent this year because of a stronger yen and a slowdown in the global economy.

Operating profit may fall to ¥41 billion (US$394 million) in the year to next March 31 from ¥43.6 billion a year earlier, the Tokyo-based company said yesterday. Revenue will probably climb 2.1 percent to ¥970 billion.

Renesas, Japan’s second-largest chipmaker, joins NEC Electronics Corp in forecasting lower earnings as the fallout from the subprime mortgage market weakens the dollar and US consumer spending.

Global sales of semiconductors will probably remain flat this year, chairman Satoru Ito said at a briefing in Tokyo.

“The first half of the year is shaping up to be rather difficult,” Ito said. “What will happen in the second half is anyone’s guess, but we expect the macro environment to begin improving.”

A ¥1 appreciation against the dollar will reduce the value of the company’s revenue by ¥2 billion and operating profit, or sales minus the cost of goods sold and administrative expenses, by a billion yen this year, Ito said.

Renesas expects the dollar to average ¥100 this year, compared with about ¥115 a year earlier.

The yen has strengthened 6.8 percent against the US currency this year, adding to a 6.1 percent gain last year.

EC Electronics, Japan’s third-biggest chipmaker, last week said the yen’s appreciation against the dollar will reduce revenue by ¥30 billion this year, and cut operating profit by ¥20 billion.

Renesas, established in 2003 by Hitachi Ltd and Mitsubishi Electric Corp, makes microcontrollers, analog chips and semiconductors for products including mobile phones and car-navigation systems.

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