NEC’s global workforce to reduce by 4,000

TOKYO: Japan's NEC Corp, the world's third-largest chipmaker, announced on

Tuesday it would cut 4,000 jobs globally as part of a plan to reverse a plunge

in profits in the face of a lingering slowdown in global high-tech industry.

As part of the long-heralded restructuring plan, it also announced it would

almost halve the output capacity at a Scottish chip making plant while freezing

plans to boost chip output at a joint venture in China. The move will lead to

600 job cuts at the plant in Scotland, which employs around 1,570 workers.

NEC said it was seeking a midterm target for an operating profit margin at

6.4 per cent and return on equity at 15 per cent. NEC's shares were up 94 yen or

6.03 per cent at 1,654 yen shortly after the announcement.

They had risen sharply in the morning for a second continuous session after

an earnings report on Friday showed the company managed to stay in the black in

the April-June quarter while the info-tech slump pushed many other Japanese

high-tech manufacturers into the red.

NEC's communications and computer operations turned out to be the star

performers of its first quarter, offsetting losses in its chip and devices

division where a steep drop in memory chip prices this year has triggered a flow

of red ink.

The company on Friday reported an 834 million yen ($6.67 million) net profit

for the quarter to June 30, down 70 per cent from a year earlier but managing to

stay in the black while compatriots such as Sony Corp and Fujitsu Ltd. recorded

net losses for the period. The company made some initial restructuring a global

information-technology slump, NEC said it would slash the number of workers at

its semiconductor production plant in Scotland by about 600 from the current

1,600 and reduce the plant's output capacity by almost half.

• It will freeze plans to spend 20 billion yen ($159.8 million) to boost
  
  chip output at a Chinese joint venture.
• It will consolidate three domestic chip-assembly units on the southern
  
  island of Kyushu into one company in October.

- As a result of this and other cutbacks in capital investment, NEC's

electronic devices division will slash overall spending by about 50 per cent

year-on-year to 120 billion yen this business year. That is 50 billion yen less

than the amount planned at the beginning of this year.

- Through these steps, NEC aims to cut the division's total fixed costs by

seven per cent in the business year starting in April 2002, compared with

2000/01 levels.

- NEC will strengthen its focus on the system LSI (large scale integration)

business and pull out of most DRAM (dynamic random access memory) businesses

after 2004.

- NEC aims for an operating profit margin of 6.4 per cent, a return on equity

margin of 15 per cent, and annual sales growth of six per cent in the medium

term.

(C) Reuters Limited 2001.