Japan's electronics makers brace for bleak 2002

Edmund Klamann, Reuters, Tokyo

As Japan staggers through its traditional "forget-the-year" party season, its top electronics executives say they are eager to put the massive losses and painful restructuring of 2001 behind them.

But the year ahead, like the morning after for a party-weary salaryman, holds little for them to look forward to.

"The bottom line is, 2002 will be very tough," Tadashi Okamura, president of Toshiba Corp., told reporters at one party this week.

"But even if the market stays like it is, we want to have a structure that will return us to profit."

With their key markets mostly expected to post little or no growth next year, several of the industry's chief executives this week chose such terms as "perseverance", "survival" and "crisis management" to sum up their objectives for 2002.

"After Sept. 11, we entered a completely different world, so now it's about crisis management," Sony Corp Chairman Nobuyuki Idei told Reuters in an interview on Thursday.

"Next year will truly be a very difficult year."

The bursting of the info-tech bubble, relentless global competition and a cooling world economy -- its prospects clouded further by the Sept. 11 attacks in the United States -- conspired to send Japanese electronics makers' profits plummeting this year and forced them to axe thousands of jobs.

Of Japan's seven electronics titans, only Sony and Mitsubishi Electric Corp. expect to squeak through the business year to next March with marginal net profits.

The other five -- computer and chip makers Toshiba, NEC Corp., Hitachi Ltd., Fujitsu Ltd. and Panasonic brand electronics maker Matsushita Electric Industrial Co Ltd. -- have forecast consolidated net losses that tally up to a whopping 1.2 trillion yen (US$9.3 billion).

From video game consoles and DVD players to digital cameras, flat-panel televisions and car navigation systems, Japan's electronics industry is not without hot-selling products.

But none could come close to offsetting the overall downturn in demand for PCs, mobile phones and network equipment, drivers of last year's info-tech boom and vital customers for Japan's semiconductors, displays and electronic components.

The latest government data showed the electronics sector, comprising nearly one-fourth of Japanese manufacturing, recorded a hefty 30 percent drop in output in October from year-ago levels -- the biggest decline of any manufacturing sector.

The difficulties are also evident in the share price performance of the seven industry leaders.

Except for Hitachi, which was buoyed by a strong outlook for its computer operations, all underperformed the benchmark Nikkei average's 25 percent drop since the start of the year.

Toshiba has skidded a particularly steep 43.8 percent so far this year and hit a 16-year low of 419 yen on Friday.

Several other key Japanese manufacturing industries, notably automobiles and office equipment, have sidestepped the wreckage, with companies such as Toyota Motor Corp., Honda Motor Co Ltd., Canon Inc. and Ricoh Co Ltd. expected to post record profits this business year.

Toshiba and NEC, Japan's two biggest chipmakers, have promised additional moves before the business year ends next March 31, hoping to get their restructuring over with.