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June 24, 2009 7:48 pm

Toshiba signals retreat from semiconductors

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Toshiba will emphasise its more stable infrastructure business ahead of volatile semiconductors, Norio Sasaki signalled as he took over as president of the Japanese conglomerate.

In an interview ahead of his election at Wednesday’s annual meeting he said: “I want to reflect properly on the experience of this economic crisis and build a Toshiba with stable profits that are not affected by changes in economic and market conditions.”

Mr Sasaki’s caution marks another step in the Japanese technology industry’s retreat from semiconductors, which are cyclical and have high capital requirements, in favour of growing markets for nuclear power and green energy.

Toshiba’s semiconductor division was affected badly by the economic downturn, reporting a Y323bn ($3.4bn) operating loss in the year to March 2009 and forcing the company to raise Y500bn in new capital this month.

The company has already started to shift its investment. Toshiba spent 71 per cent of total capital expenditure on semiconductors in its 2007 fiscal year but plans to spend only 39 per cent this year.

Mr Sasaki said Toshiba’s big-ticket nuclear power projects also have risks and pointed to the balance given by different cycles in Toshiba’s three main divisions of infrastructure, semiconductors and digital products such as televisions.

“However, we must think carefully about when and how much we invest [in semiconductors] in order to minimise any increase in fixed costs,” he said.

In a nod to investor concerns following the capital raising, Mr Sasaki said, “we also have to consult the balance sheet”.

Toshiba’s chip business – which makes the processor for Sony’s PlayStation 3 games console – was too widely spread, Mr Sasaki said.

A return to full production of flash memory chips, Toshiba’s biggest and most successful semiconductor business, would depend on the strength of the market, he said.

Among Toshiba’s infrastructure operations, Mr Sasaki identified its new lithium-ion battery technology as a product that “could be transformational”.

Toshiba’s “super charge ion battery” is designed to recharge to 90 per cent of capacity in less than five minutes, and the company has signed a development deal with Volkswagen to use it in electric cars.

In the nuclear business, one of Toshiba’s main hopes for growth, Mr Sasaki said orders to build reactors in the US and China were generating increased sales as the manufacture of core components had begun.

A nuclear engineer by background, Mr Sasaki made his name by leading Toshiba’s $5.4bn purchase of Westinghouse, the US reactor company, in 2006.

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