TOKYO (Reuters) - Japanese electronics maker Toshiba Corp <6502.T> said it expects its operating profit to more than double over the next three years as it cuts costs, ramps up capacity for its semiconductors and seeks nuclear plant orders.
By Mayumi Negishi
TOKYO (Reuters) - Japanese electronics maker Toshiba Corp <6502.T> said it expects its operating profit to more than double over the next three years as it cuts costs, ramps up capacity for its semiconductors and seeks nuclear plant orders.
Toshiba, the world's No. 2 maker of NAND flash memory chips after Samsung Electronics Co Ltd <005930.KS>, is racing to build two new NAND flash memory plants and expand capacity to build chips, hoping to beat price falls with economies of scale.
It also aims to win 33 nuclear plant orders worldwide by 2015 and post a return on its acquisition of U.S. nuclear power firm Westinghouse in 13 years, one year earlier than previously stated.
!ADVERTISEMENT!Cost cuts throughout its operations, which range from refrigerators to MRI machines, will be key to raising profitability, Toshiba President Atsutoshi Nishida said on Thursday.
"Our businesses have become commoditized," Nishida said at a meeting with analysts and reporters. "It's getting increasingly tough to differentiate our products from other brands, and we need to treat our products as such."
The statement is a departure from Japanese electronics firms' tendency to focus on high-end products as they lose market share to undercutting rivals overseas.
"It means Toshiba is acknowledging that it needs to tighten its belt and fight like other global players," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co. "That means trimming costs at underperforming operations, or trimming the businesses altogether if they don't pay."
"Whether or not Toshiba really follows through is a question mark."
In the past, Toshiba has looked to its technological prowess for growth, pointing to its history of having developed Japan's first light bulb and claiming to have made the world's first NAND flash memory chip, now used in portable audio players and other mobile devices.
But the pursuit of high-end niche products -- in hopes that consumers would buy their technology at a premium -- have often hurt Toshiba's profit margins.
Semiconductors and nuclear power continue to be the firm's main profit earners, while margins on its digital products and home electronic segments have remained at a low 0.5 percent.
Toshiba said it would aim for a group operating profit of 500 billion yen ($4.79 billion) in the 2010/2011 business year on sales of 10 trillion yen, with a return-on-equity of 15 percent or higher.
The operating profit would be more than double the 238.1 billion it posted in the year ended in March and up 72 percent from its forecast for 290 billion yen in operating profit in the current fiscal year.
RAMPING IT UP
Toshiba expects capital spending to amount to a cumulative 2.2 trillion yen in the three years to March 2011, of which more than 1 trillion yen would go to its semiconductors.
Toshiba, which held 27.5 percent global NAND market share in 2007 according to iSuppli, plans to build two new NAND plants in Japan to go on stream starting in 2010.
It is also switching to smaller circuitry using 43-nanometre processes for over 90 percent of its NAND chips by March next year. Moving from 56-nanometre chips to next-generation 43-nanometre packs more power onto each sliver of silicon. A nanometer is one billionth of a meter.
Semiconductor sales would rise 44 percent to 2 trillion yen in the three years to March 2011, even while NAND prices are likely to drop 40 percent to 50 percent each year, it said.
Toshiba plans to expand its lineup of system chips with high-performance Cell chips, used in Sony Corp's <6758.T> PlayStation 3 game console, and chips used in Sharp Corp's <6753.T> flat TVs, while scaling back chips used in small LCD displays.
It also plans to lift capacity sixfold for its power devices and other discrete chips used to control functions inside bigger integrated microchips to 60,000 200-millimetre wafers per month by March 2011.
Shares of Toshiba closed down 2.6 percent at 863 yen, against a 1.1 percent fall in the benchmark Nikkei average
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(Editing by Hugh Lawson, Chris Gallagher and Quentin Bryar)
