NEC to cut 1,260 jobs

December 18, 2001 Posted: 1202 GMT

LONDON (CNN) -- NEC, the world's No. 3 chipmaker, said on Tuesday it will cut 1,260 jobs, due to weakening demand for mobile phone-related systems.

The Japanese company plans to shut its plant in West Lothian, Scotland, which manufactures system chips, DRAM (dynamic random access memory) and other semiconductors, for mobile phones.

"In line with NECSUK's suspended production, it is proposed that all of the 1,260 employees will be made redundant by March 2002," NEC said. Workers were told of the news as they arrived for work on Tuesday.

The company blamed a downturn in demand for its products in Europe and said the plant may reopen if demand for semiconductors picks up.

But NEC still anticipates a 100 billion yen net loss ($821 million) for the year. Its memory-chip business has suffered in particular, faced with a 90 percent slump in price and savage competition from South Korea's Samsung Electronics and Hynix Semiconductor.

The plant closing comes during a rigorous restructuring of the company to cut costs by 14 percent year-on-year during the business year to next March.

According to the Nihon Keizai Shimbun newspaper, Japanese chip and electronics maker Mitsubishi Electric also plans to cut 1,000 jobs and halve output capacity at its French cellular phone handset subsidiary due to weakening demand.

The newspaper said the company plans to cut 70 percent of its workforce at the subsidiary, Mitsubishi Electric Telecom Europe, and reduce output capacity to 7 million handsets a year by the end of March 2003.

A Mitsubishi Electric spokesman would not confirm the report, but told Reuters: "We do not need as need as much output capacity as initially planned so we need to slim it down, but we have not yet come to a definite decision as to the most suitable way to do that."

Reeling from price competition and the global high-tech slump, Japanese chip conglomerates have been revamping their semiconductor operations, withdrawing from low-end commodity DRAMS.

On Tuesday, Toshiba became the last of Japan's big chipmakers to eliminate making commodity DRAMs computer memory chips.

Shares in NEC rose 1.8 percent to 1,364 yen in tandem with the benchmark Nikkei which climbed 1.05 percent on Tuesday. The news came after the stock market had closed.