NEC Corp, the third-biggest chipmaker, will probably report a profit fall in the second half as personal computer demand slumped, forcing down prices of memory chips, analysts said.
The Tokyo-based company's group net income probably fell 36 percent to ?39.2 billion (US$320.2 million) in the six months ended March 31, from ?61.5 billion in the same period a year earlier, according to the average estimate of 12 analysts surveyed by IBES International. That's in line with NEC's estimate of ?39.5 billion.
Slowing personal computer sales have dragged down the prices of memory chips for PCs, hurting the earnings of NEC, Samsung Electronics Co and other chipmakers. To regain profitability, NEC will announce measures to cut costs in its PC and semiconductor businesses when it reports earnings tomorrow. Investors will scrutinize the cost-cutting plans more closely than the earnings numbers, analysts said.
The current industry standard chip, 128-megabit 8 by 16 PC100 dynamic random access memory, costs about US$4.17 on the spot market, less than the cost of production for most makers. That compares with US$17.9 in July 2000, the highest in the past year.
DRAMs, the main memory chips for PCs, accounted for 6.5 percent of NEC's revenue in the first half ended September 2000.
NEC in February estimated profit of electric components, including semiconductors and flat-panel displays, to be ?70 billion in the year ended March 31. Based on Bloomberg's calculations, the profit will probably fall 78 percent to ?10 billion in the six months ended March 31, from ?45.7 billion a year earlier.
Profit from computer hardware, software and support services probably fell 22 percent to ?55.3 billion in the six months ended March 31, from ?70.8 billion a year earlier, according to the figure calculated by subtracting first-half profit from NEC's full-year profit estimate.
NEC, Japan's biggest PC maker, last month said it will sell some domestic and overseas plants that make computers, mobile phone handsets and network equipment to so-called electronics manufacturing service, or EMS, companies. NEC has said it may also shift production to Asian countries where costs are lower.
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