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Appeared on: Friday, February 23, 2007
NEC Cut Outlook on Chips

Struggling Japanese microchip maker NEC Electronics said it expected a bigger loss in the current business year on slow chip sales.

NEC Corp., a Japanese electronics conglomerate holding a 70 percent stake in NEC Electronics, also cut its operating profit forecast by 15 percent on Thursday, hit by the chip unit's sluggish performance.

NEC Electronics said it would close old production lines, slash outsourcing costs and salaries to cut fixed costs by 20 billion yen and move into the black next year.

The company would withdraw from application-specific chips with low profit yield and cut development costs for chips that run applications like Web sites on mobile phones, it said.

It would instead focus on chips to run cars and graphic processing chips used in products like cameras, games and flat TVs, it said.

The company will reduce the number of production lines it has in Japan to four lines from nine by an unspecified date and shift production for low-end chips overseas to its plants in China, Malaysia, Singapore and Indonesia, executives said.

But it said it does not now have concrete plans to close factories for cutting edge front-end processes or cut staff for the next three years.

NEC now expects an operating profit of 85 billion yen for the year to March, down from a previous forecast of 100 billion yen.


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