Japan's Top 2 Semiconductor Plants Consolidate Operating Dilemma

Toshiba, a semiconductor-integrated component manufacturer, now ranks as the leading semiconductor company in Japan. In the second quarter of 2012, its company’s revenue declined by 25% from the first quarter to only 190.9 billion yen (approximately US$2.4 billion), the lowest in the single season since 2010. Not only that, but the operating profit and loss also changed from 15.6 billion yen in the first quarter to a loss of 1 billion yen.

Toshiba’s semiconductor business uses memory such as NAND Flash as its main revenue source. In the second quarter of 2012, the price of global NAND Flash continued to fall. Toshiba’s memory revenue decreased by 39% from the first quarter to only 95.3 billion yen. During the quarter, NAND Flash's interest rate slipped to -1%, resulting in a poor performance of the Toshiba Semiconductor business in the second quarter.

Japan's other IDM Renesas Electronics, which currently ranks as the second largest semiconductor manufacturer in Japan, reported a 9 percent decline in revenue in the second quarter of 2012 compared to the first quarter, at only 168.2 billion yen, also the lowest in the single quarter since 2010. The level is not only that, the quarter of Renesas Electronics operating losses reached 17.6 billion yen, has been a loss for five consecutive quarters.

Toshiba and Renesas Electronics have also started to restructure their businesses in the same difficult business situation. The main strategies are to adjust the product structure, restructure the production structure, and expand the outsourcing of OEMs.

To adjust the product structure, Toshiba plans to use memories such as NAND Flash in storage devices such as HDDs; Renesas Electronics will continue to expand its MCU and analog/power components by using its high market share of global microcontrollers (MCUs). (Analog&Power;A&P) complete solution to increase A&P market share.

To reorganize its production structure, Toshiba has begun to reduce its discrete component production base by concentrating its semiconductor operating resources on memory and is scheduled to complete in September 2012. Renesas Electronics has sold and closed several factories since 2011 until 2015. , will continue to sell and shut down the plant, reducing the Japanese production base.

To expand the number of outsourced OEMs, Toshiba will continue to increase the proportion of OEMs for advanced process SoCs, and will also increase the proportion of subcontract manufacturing for later systems LSIs and discrete components in Asia; Renesas Electronics plans to complete the production restructuring. The proportion of the subcontract manufacturing process in the first and second stages of the process has been expanded to more than 30%.

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