Fujitsu to ditch semiconductors, reports $1bn loss

Japanese technology giant Fujitsu will get rid of its semiconductor business as it battles through a tough chip market that dragged down its third-quarter earnings to a ¥79 billion ($A819 million) loss.

Fujitsu will spin out the division and merge it with rival Panasonic’s LSI chip business. The new company will design LSI chips and contract out their manufacture. It is seeking funding from external sources including the Development Bank of Japan.

“As a result of these decisions, the scale of Fujitsu's system LSI business will expand and be operated as an independent company,” Fujitsu said in a statement. “Fujitsu is considering numerous options with the aim of offering a stable supply of products to customers through its microcontroller and analog device businesses.”

The company said for the past six years it had attempted to operate under a “fab-lite” business model (not owning the semiconductor fabrication facilities) for its semiconductor business which had not been successful. 

“This business has been confronted with an extraordinarily difficult operating environment as sales declined due to fast-deteriorating market conditions and an increasingly severe competitive climate," Fujitsu said.

The two companies will focus on high-performance servers for cloud infrastructure, as well as imaging and wireless fields.

Fujitsu’s 300mm-wafer manufacturing plant in Mie, Japan will merge into a new foundry company with Taiwan Semiconductor Manufacturing Company. Fujitsu will design the chips to be built at the factory. Fujitsu’s 150mm and 200mm wafer lines will also be restructured, consolidating its two Japanese factories into one.

Fujitsu is also considering the future of its analog devices and microcontroller business. The company said it is working to ensure supply to customers while the business is up for discussion.

As a result of its restructuring plans, around 5000 workers will lose their jobs while another 4500 will be moved to spin-off companies. The company has 173,2000 employees worldwide.

Fujitsu will take a ¥112 billion charge ($A1.16 billion) related to the restructure.  

Net sales for the quarter fell just under three percent year on year to 1048 billion yen ($A10.8 billion). Fujitsu forecast a net loss of ¥95 billion ($A986 million) for its fiscal year ending March, compared with a previous projection for net income of ¥25 billion ($A259 million).

Panasonic is also currently undergoing its own restructuring plan, planning to reorganise 88 business units into 56 to weed out low-profit and loss-making divisions. Details of the revival plan are expected in March.