Toshiba and Hitachi set to axe 40,000 jobs as slowdown bites

Toshiba Corporation and Hitachi, two of Japan's biggest electronics companies, are to cut 20,000 jobs each this week as the economic slowdown gathers pace. The announcement could come as early as today.

The wave of redundancies follows similar announcements from NEC and Fujitsu as Japan's huge electronics manufacturers face their second round of retrenchments in three years.

Toshiba, Japan's second largest maker of semiconductors , will cut around 11 per cent of its 190,000 workers as part of a wide-ranging review of its manufacturing organisations. Hitachi, the country's third largest company in the semiconductor market, is expected to axe 6 per cent of its 340,000 employees.

Fujitsu, where first-quarter losses tripled due to lower computer chip prices, is cutting 16,400 jobs, about 10 per cent of its workforce. NEC is pulling out of memory chips altogether and is shedding 4,000 jobs.

Prices for DRAM chips, used largely in personal computers, have fallen by about 90 per cent over the past year due largely to increased competition from Korean and Taiwanese producers.

The global semiconductor industry is also facing its worst slump ever this year after a sudden slowdown in demand for PCs, mobile phones and networking equipment began late last year.

"We will make an announcement very soon," said Toshiba president Tadashi Okamura at the weekend. Toshiba may slash more than 10,000 jobs in Japan through early retirement. Jobs will be eliminated at the company's chip-related divisions and also at its home-electric appliances and heavy electronics businesses, according to reports in several Japanese newspapers.

Toshiba, led by chairman Taizo Nishimuro, may spin off its memory-chip business, merging it with that of either Korea's Samsung Electronics or Germany's Infineon Technologies. Japanese chipmakers have lagged behind their American and European counterparts in lowering their cost bases. Infineon Technologies is cutting 5,000 jobs, or 15 per cent of its workforce, while Motorola is pulling down the shutters in chip plants in Arizona and will eliminate 30,000 jobs this year.

Hitachi would not comment on the forthcoming cuts, though it has already announced plans to cut spending on semiconductor plant and equipment by 36 per cent this year. However, it is expected to trim its worker numbers through a hiring freeze and by offering early retirement.

Last month, Tokyo-based Hitachi said the company will meet its earnings forecast for the first half, ending 30 September, as brisk sales of storage equipment will offset a 38 billion yen (£220m) loss at its semiconductor division.

The company is expected to post a loss of between 10 billion yen and 100 billion yen from its semiconductor business for the full year ending March 2002.

In April, Hitachi forecast that its group net income would fall 14 per cent to 90 billion yen for the full year, from 104 billion yen a year earlier.

NEC said last month it would shift all of its DRAM (memory chip) operations to a 50-50 joint venture with Hitachi by 2004 and would eventually reduce its stake. Shares in Hitachi have lost 3 per cent of their value since the start of the year while Toshiba shares have fallen about 25 per cent.