Fujitsu Ltd, whose first-quarter losses quadrupled on lower chip prices, will cut 16,400 workers, or about 10 percent of its workforce, as the company focuses on software and services.
By next March, Fujitsu will make 11,400 of the cuts overseas.
Only 5,000 jobs will be lost in Japan, limited to contract workers or early retirement of full-time staff. The company will take a ?300 billion (US$2.5 billion) charge announced last month to cover the costs.
The job cut plan, expected to reduce costs by ?100 billion a year, is four times the size of one announced by NEC Corp last month and is among the largest ever in a country where many workers still expect a position for life. Rival chipmakers may have little choice but to follow suit as global computer and mobile-phone sales fall for the first time in two decades.
"The software and services business is not providing the boost Fujitsu is hoping for," said Yoshihide Ohtake, an analyst at Tsubasa Research Institute, who rates the shares "average."
"This may fail to offset the effects of cost cutting so it's really not all that positive for Fujitsu." The company hopes to post operating profit of ?400 billion in fiscal 2003, boosted by contributions from its software services business. Fujitsu said software should contribute ?275 billion, or 69 percent, of its operating profit by then.
A growing reliance on software accompanies Fujitsu's shift away from hardware even though the company is Japan's largest maker of business computers. Fujitsu will quit the desktop PC hard-drive business and pare the number of its chip-packaging units to five from seven.
"My impression is, Fujitsu's finally doing what it's supposed to do, as Fujitsu had done nothing so far,'' Akira Hiramine, chief investment officer at Invesco Asset Management Ltd, which manages US$7.7 billion in Japanese equities, said before Fujitsu released details of the plan.
Fujitsu's earnings have slumped as consumers bought fewer computers and the semiconductor industry struggled through one of its worst years on record. The company expects a ?220 billion group loss this year.
Worldwide personal computer sales fell 1.9 percent from a year earlier in the three months ended June 30, researcher Dataquest Inc said last month, and mobile-phone shipments may fall this year for the first time in the industry's two-decade existence, according to projections by Sweden's Ericsson AB and Morgan Stanley Dean Witter & Co.
The job reductions at Fujitsu follow reports of losses and cutbacks by other Japanese electronics makers. Toshiba Corp, the No. 2 chipmaker, will lose money in its chip business in the six months ending Sept. 30 and may cut jobs, unit President Takeshi Nakagawa said last week. Earlier this month, Toshiba said it will cut production of computer chips by almost a quarter.
NEC, the No. 3 chipmaker, will cut 4,000 jobs in its semiconductor operations and withdraw from memory-chip production within three years, the company said late last month. Sony Corp, the second-largest consumer-electronics maker, may fire workers in the US because of slowing growth there, company spokesman Kei Sakaguchi said Friday.
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