Japanese semiconductor companies hurt in second quarter, study says

Semiconductor sales for companies in US, South Korea and Taiwan grow

The Japanese semiconductor industry is on a downward spiral as rival companies in Taiwan, South Korea and the USnmade gains in chip, memory and integrated circuit sales, research firm IC Insights said in a study.

The sales of semiconductors from four manufacturing and fabless companies in Japan -- Toshiba, Renesas, Sony and Fujitsu -- fell by 16 percent in the second quarter when compared to the first quarter this year, IC Insights said.

The poor performance of Japanese semiconductor companies came due to a collapse in sales of memory products, primarily NAND flash storage, which goes into devices like smartphones and tablets, said Bill McClean, president of IC Insights and author of the report.

The Japanese semiconductor industry is also taking another hit with Elpida to be soon acquired by Micron Technology. The U.S. firm said in early July it would pay US$2.5 billion to acquire the bankrupt Elpida, which was a dominant memory company in the 1980s and 1990s. The sale of Elpida will end Japan's involvement in the DRAM industry as Toshiba exited the business a decade ago.

Sales for the largest Japanese semiconductor company, Toshiba, was $2.4 billion during the second quarter, dropping by 26 percent compared to the first quarter this year. Toshiba is the sixth largest semiconductor company behind Intel, Samsung, TSMC (Taiwan Semiconductor Manufacturing Co.), Texas Instruments and Qualcomm.

To fix the situation, Toshiba plans to cut NAND flash production by 30 percent. Toshiba also makes integrated circuits, sensors and other chips, for which sales were less severely affected or flat, according to the study.

A lot of the chip manufacturing capacity and sales activity has moved outside to rivals such as South Korea's Samsung Electronics and Taiwan's TSMC, which maintained 100 percent manufacturing capacity and recorded the fastest growth rate when compared to all semiconductor companies. TSMC had sales of $4.3 billion, a growth of 22 percent from the first quarter.

Semiconductor sales for Renesas, the second largest Japanese semiconductor company and the seventh largest in the world, dropped by 10 percent over the first quarter. Fujitsu's semiconductor sales dropped by 23 percent, while sales for Sony grew by an industry average 3 percent.

While the first half was grim, the second half looks brighter for Japanese semiconductor companies. Toshiba and Renesas have aggressive sales outlooks for the coming quarter, McClean said.

Other factors that could possibly contribute to the growth in semiconductor sales in the second half for all companies include the introduction of Windows 8, which could spark sales of devices such as tablets. The introduction of newer thin-and-light ultrabooks at a less expensive prices could also push semiconductor sales.

Overall semiconductor sales totaled $105 billion in the first half, with a 5 percent rise in sales projected in the third quarter from the second quarter. Intel was the top semiconductor company with sales of $12.4 billion in the second quarter, growing by 5 percent compared to the first quarter.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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Agam Shah

IDG News Service
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