NEC Corp's announcement on Thursday that it would cut 10,000 jobs globally followed a decision by electronic parts maker TDK Corp in October to slash 11,000 jobs, with both being examples of the tough decisions firms in the electronics industry are being forced to make.
According to NEC's consolidated financial settlement for fiscal 2011 ending March 31, NEC expects a net loss of 100 billion yen (US$1.30 billion), though it projected 15 billion yen ($195 million) in net profit in the forecast announced in October. NEC has projected after-tax losses for two consecutive periods.
The gloomy figures are mainly a result of a slowdown in the company's Personal Solution Business area, which deals with cell phones and personal computers. Sales in this area fell to 675 billion yen, down 11.9 per cent from a year earlier.
In the domestic cell phone market, NEC has lost ground to foreign companies such as Apple and Samsung Electronics because the company lagged in the development of smartphones.
As a result, NEC downwardly revised its target for cell phone shipments for fiscal 2011 from 6.5 million to 5 million.
NEC also has been struggling overseas. Due to the economic crisis in Europe, local telecommunications companies decreased their investments in communication devices. NEC expects sales in its Carrier Network Business to drop by 70 billion yen from its forecast in the previous period.
The flooding in Thailand is expected to lower sales by 22 billion yen, while net operating profit is forecast to drop by 9 billion yen.
Electronic parts factories were damaged by the flood, and hard disk drives became in short supply, causing a disruption in the production of personal computers.
At a press conference on Thursday, NEC President Nobuhiro Endo said, "We'd like to strengthen the company through structural reforms."
In accordance with its decision to cut about 10,000 jobs, NEC announced Thursday it would strengthen cooperation with manufacturers in other countries in product development and production.
In January 2009, NEC announced it was cutting about 20,000 jobs, mainly in sluggish semiconductor and liquid crystal display-related businesses.
However, NEC's earnings in the cell phone and server businesses are unstable due to price wars with emerging countries.
This poses a problem not only for NEC but for all electronics makers.
TDK announced in October that it would reduce its staff by about 12 per cent. Toshiba Corp announced in November it would close three semiconductor-related factories, including its oldest factory in Kitakyushu.
Panasonic Corp has been carrying out its plan to reduce its 385,000-person workforce to 350,000 by the end of March.
Amid a difficult management environment due to the strong yen and power shortages in the wake of the March 11 disaster, this streamlining trend could continue.