NEC Electronics' Q3 loss smaller

TOKYO, JAPAN: Japanese chipmaker NEC Electronics Corp reported a quarterly net loss that was 29 per cent smaller than a year earlier, as the struggling chipmaker cut spending on research and production.

Thanks to better demand for microcontrollers used in cars, orders are gradually improving after sliding amid the global economic slowdown, although they are still expected to fall short of their April-September 2008 levels, it said.

"Demand for chips for new digital cameras and flat TVs are strong," NEC Electronics President Junshi Yamaguchi also told a news conference.

But he declined to say whether or not demand for game chips - a key sector for the company - had improved, only that demand was as expected.

NEC Electronics makes chips for Toyota Motor Corp's Lexus car and Nintendo Co's Wii game console.

NEC Electronics reported a 14.3 billion yen ($160 million) net loss in October-December.

It kept its outlook for a net loss of 59 billion yen for the year to March. It would be its fifth straight annual loss and compare with an 85.1 billion yen loss in the previous year.

Its quarterly operating loss was 41 percent smaller than the previous year at 9.3 billion yen as sales fell 8 percent.

In preparation for its merger with Renesas Technology in April, the company switched to Japanese accounting standards last month - a move which has meant that analysts have yet to issue revised earnings estimates for the company.

NEC Electronics has been struggling with its cutting-edge domestic factory running at roughly 50 percent capacity, but executives said that the usage rate will likely rise to 75 percent in January-March.

NEC Electronics, which is on track to cut a planned 90 billion yen in fixed costs in the year to March, also said that it plans to cut capital spending by 44 percent this year to about 32 billion yen. It did not give an outlook for next year, following its merger with Renesas.

The merger of NEC Electronics, 65 percent-owned by NEC Corp and of Renesas, a joint venture between Hitachi Ltd and Mitsubishi Electronics, will create the world's third-biggest chipmaker after Intel Corp and Samsung Electronics.

But the success of the union of the two loss-making chipmakers hinges on their ability to outsource production, trim their many overlapping businesses and revamp their product lineup to target growth overseas, analysts have said.

Prior to the announcement, shares of NEC Electronics closed down 4.9 percent at 674 yen. The stock has lost 12 percent so far this month, underperforming a 3 percent fall in the benchmark Nikkei average.