NEC Corp will ask 6,600 workers at its chip plants in Japan to stay home several days this month and next on partial pay to help cut costs as the slump in demand for semiconductors deepens.
About 2,900 workers in Shiga prefecture will take four days off by yearend, while 2,000 employees in Yamagata prefecture will take between two and six days off this month, spokesman Shinichi Kaede said.
Staff at two more of the third-largest chipmaker's plants will stay home for one to three days, he said.
Japan's four biggest chipmakers are cutting thousands of jobs and idling plants after posting combined losses of ?439 billion (US$3.6 billion) in the six months to Sept. 30.
With sales having fallen by almost half in September and companies such as Toshiba Corp predicting even worse in the second half, chipmakers must take more steps to cut costs, investors say.
"Japanese chipmakers should get out of chip production and do only research and development," said Keisuke Nakayama, who helps manage billions in Japanese equities at Credit Agricole Asset Management Japan Ltd, which holds NEC shares. "NEC should take more drastic measures."
NEC's steps are in response to sinking demand for personal computers and cellphones. Chip sales in September dropped 45 percent to US$10.2 billion from US$8.4 billion a year earlier, the Semiconductor Industry Association said Thursday.
NEC, which had a group loss of US$0.8 billion in the three months to Sept. 30, will pay the furloughed workers 80 percent of their daily salary on the days off.
The four plants, three of which are microchip-packaging factories, have "a lower capacity utility ratio than the 70 percent average in Japan," Kaede said. The remaining plant makes chips for communications gear, cell phones and other devices.
Tokyo-based NEC doesn't know how much production will be reduced by the furloughs, Kaede said, adding two of the plants will keep machines running.
"NEC alone is not going to bring the market into balance," said Steven Myers, an analyst at HSBC Securities (Japan) Ltd, who rates NEC shares "buy." Shuttering plants is "one in a series of steps NEC is taking."
NEC halted production at three local semiconductor plants and one line at a fourth plant for four days last month. Fujitsu Ltd, the third-largest mobile-phone memory chipmaker, halted production last month at three chip factories for five days.
Toshiba Corp is also planning to increase the number of yearend and New Year holidays for semiconductor factories, according to a report in the Tokyo Shimbun, which earlier reported the furloughs at NEC.
NEC doesn't plan to ask workers at its plant in Hiroshima prefecture, western Japan, to go on leave, Kaede said. This is the only factory where NEC makes dynamic random-access memory chips, the main memory in personal computers.
NEC expects its DRAM chip business to post losses totaling about ?80 billion in the year ending in March 2002, more than double its earlier operating loss forecast of ?30 billion, the company said.
Spot prices of 128-megabit DRAM chips fell 81 percent to US$1.10 in the past 10 months, below the cost of production for DRAM makers.
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