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Japan chip company triples profits

By Reuters, CNET.News.com, NEWS.COM on May 21, 2001

Summary

Tokyo Electron, Japan's biggest maker of semiconductor equipment, on Friday posted record profits for the last business year but said its gains would turn to pain this year because of a chip market slump.

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TOKYO--Tokyo Electron, Japan's biggest maker of semiconductor equipment, on Friday posted record profits for the last business year but said its gains would turn to pain this year because of a chip market slump.

The company reported a more than tripling of its consolidated net and operating profit for the business year ended March 31, with net at US$505.7 million (¥62 billion) and operating income of $US979.8 million, on sales of US$5.8 billion.

The figures were slightly better than official estimates issued by the company in February.

For the current business year, however, the company forecast a nearly 80 percent drop in both net profit, to US$113.3 million, and operating profit, to US$218.5 million, with sales seen dropping 23.2 percent to US$4.5 billion.

The profit targets were at the bottom of the range of analysts' expectations, triggering a slide in the company's shares in late-afternoon trade to a one-month low of US$68, down more than 5 percent on the day.

They recovered modestly by the close to end 2.15 percent lower at US$70.

The global chip and electronics sector was hit hard late last year by a sudden downturn in demand for high-tech goods such as cell phones and personal computers, and the industry is nervously hoping that the slump will bottom out by this summer.

"It's being said that July to September will be the bottom, but the outlook remains unclear," said Yukio Saeki, vice president in Tokyo Electron's accounting department. "But personally, I think we'll hit an updraft sometime this year."

Waiting to exhale
He expected that Tokyo Electron's net orders in the April to June quarter would be flat to slightly better than the January to March figure, which came in at US$472.8 million. That was down more than 60 percent from the previous quarter's US$1.2 billion.

For the company's January to March fourth quarter, net profit tumbled 37 percent from the prior quarter to US$102 million, and operating income dipped 8 percent to US$256.6 million. No year-ago comparisons were available, since 2000/01 was the first year Tokyo Electron reported on a quarterly basis.

For the current business year, Tokyo Electron expected a particularly sharp drop in sales to Korean and Taiwanese chipmakers, which accounted for 40 percent of its sales last year but were likely to make up only 25 percent this year.

The chip sector's sudden downturn in the January to March quarter was in stark contrast to heady growth in the first half of the business year, when the information technology boom was in full swing.

"IT-related equipment such as PCs, cell phones, network equipment and digital consumer electronics grew rapidly, fueling a sharp expansion in the global semiconductor market," the company said in a statement. "But signs have appeared of the effects of the US economic slowdown since the start of the year."

The market appears to be gaining confidence that the slump is bottoming out, although analysts generally expect any recovery to be gradual.

Tokyo Electron's shares have risen nearly 40 percent from a 20-month low hit at the end of last year, compared with a modest 6.7 percent rise in the technology-sensitive Nikkei average during the same period.

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