Fujitsu to lay off 670, close semiconductor plant

Edmund Klamann

TOKYO: Japanese computer and chip conglomerate Fujitsu Ltd. said on Friday it

will shut a chipmaking plant in Gresham, Oregon and lay off 670 workers as part

of its drive to confront the chip market's deepest downturn ever.

The 13-year-old facility fell victim to the company's recent promise to cut

20,900 jobs, or 11.6 per cent of its global work force, and rein in an ambitious

expansion in flash memory chips, used heavily by the once high-flying cell phone

industry but now reeling from steep price declines.

"Fujitsu has concluded that it must reorganize its worldwide

manufacturing structure to eliminate surplus flash memory capacity, a process

that unfortunately requires the closing of the Gresham plant," the company

said in a statement.

Fujitsu, the world's third-largest flash memory maker, will close the Oregon

facility by January and consolidate production at a plant in Japan run by a

joint venture with Advanced Micro Devices Inc, the number-two flash memory

maker.

"The recovery of the flash memory market now seems likely to be pushed

back by at least six to 12 months from the previously anticipated late-2002 time

frame," the statement said.

Flash fizzles



Fujitsu had already said it would consider shutting the plant or making it into
a joint operation with AMD, and a spokesman said the move would not affect

earnings or payroll reduction targets announced last month.

Fujitsu's shares ended morning trade on the Tokyo Stock Exchange up 0.39 per

cent at 1,024 yen, outperforming the benchmark Nikkei average's 0.66 per cent

drop but in line with modest gains among other major Japanese electronics

shares.

The semiconductor slump has forced Japan's big chipmakers to retreat from or

dramatically reorganise operations in commodity-grade chips, most notably

dynamic random access memory (DRAM) chips used in personal computers.

NEC Corp and Hitachi Ltd., Japan's second- and third-largest chip makers,

have shut capacity and laid off workers this year at plants in California,

Scotland and Singapore.

Toshiba Corp, Japan's biggest chipmaker, has slashed DRAM output in Japan and

is in talks with Infineon Technologies AG, the world's fourth-largest DRAM chip

maker, on combining DRAM operations in a joint venture that would be

majority-owned by the German company.

Fujitsu was ahead of its peers in withdrawing from the hotly competitive DRAM

market, where South Korean chipmakers have invested particularly aggressively,

and moved into the more promising market for flash memory chips used in

cellphones and consumer electronics.

Bringing operations home



But with this year's info-tech slump also taking a severe toll on cell phone
demand, Fujitsu was forced to pare back plans for a two-thirds increase in flash

memory production capacity in the current business year to March. It now plans a

boost of less than 30 per cent.

Fujitsu said the Gresham plant, which began converting all of its production

to flash memory in April 2000, had been operating well below capacity since the

beginning of 2001.

The company, also Japan's biggest computer maker, has been shifting its focus

to computer software and services, which offer a more steady source of profit

than the volatile chip business.

Fujitsu had said in August it would streamline its far-flung operations and

concentrate development and production at home, with overseas operations taking

the bulk, or 11,400, of a planned 16,400 job cuts worldwide.

That figure was bumped up by another 4,500 in October, including 4,000

abroad, when the company said the chip and info-tech slump was even worse than

it thought and raised its forecast consolidated net loss for this business year

to 310 billion yen ($2.5 billion) from 220 billion yen.

Fujitsu, Toshiba, Hitachi and NEC have forecast a combined 890 billion yen in

net losses for the business year to March, largely reflecting job cuts and

restructuring costs in their semiconductor divisions, but many analysts complain

they are still too timid in restructuring and seeking new growth areas.

(Additional reporting by Daniel Hauck)

(C) Reuters Limited.