Japanese Tech Stock Weekly Summary (Oct. 6-12, 2008)

by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

• • •


Sharp Corp. issued a profit warning for this fiscal year ending March, blaming a slump in sales of mobile phone handsets in Japan and weakness in liquid crystal display panel prices. The company cut its group net profit outlook to 60 billion yen (US$596 million) for this fiscal year from 105 billion yen (US$1 million) in its prior outlook in late April. The company also revised downward its operating profit outlook to 130 billion yen (US$1.3 billion) from 195 billion yen (US$2 billion). Sales are pegged at 3.4 trillion yen (US$34 trillion), compared with the previous forecast of 3.6 trillion yen (US$36 billion). That is nearly double the 45 billion yen (US$447 million) in operating profit estimated for the fiscal first half that ended September. The company said it would be too early for other businesses, such as solar batteries and home appliances, to be strong enough to more than offset the company's sluggish cellphone operations.

Fujitsu Ltd. (OTCPK:FJTSY) is in talks with U.S. hard disk drive maker Western Digital Corp (NYSE:WDC) on the sale of its money-losing hard drive business. The move would be the latest in a round of consolidations as inventories in computer storage drives climb and price falls batter smaller hard disk drive makers. The two were in talks sent Fujitsu's share price up 4.7 percent, against the benchmark Nikkei average's 1.9 percent fall and despite Fujitsu's denial that it was approaching an agreement. Fujitsu competes in hard drives in a market roughly 60 percent controlled by heavyweights Seagate Technology and Western Digital. Fujitsu, whose losses in hard drives were approximately 5 billion yen (US$47.3 million) in the year ended in March, is also in talks with other makers and aims to sell the business by the year-end.

Ibiden Co. (OTCPK:IBIDF) anticipates group net profit sinking 52 percent to 22.3 billion yen (US$224.6 million) in the year ending in March. The company, which had previously predicted a net profit of 34.6 billion yen (US$344 billion), has trimmed its fiscal 2008 forecast twice. Sales are estimated slipping 8 percent to 380 billion yen (US$4 billion), an about-face from a prior prediction for a 2 percent jump to 420 billion yen (US$4.17 billion). At the electronics division, sales of next-generation build-up circuit boards for cell phones have been dropping 20 percent. Although demand for commodity-grade printed wiring boards is growing in places like the BRIC nations of Brazil, Russia, India and China, that will not offset lackluster sales of its top-of-the-line products. Sales of diesel particulate filters at its ceramics business have skidded 20 percent. With supplies to Ford Motor Co. (NYSE:F) unlikely to recover early next year, European sales are also seen slipping.


Elpida Memory, Inc.  (OTC:ELPDF) and Numonyx B.V. have formally signed a foundry agreement for Numonyx to utilize Elpida’s 300mm wafer facility in Hiroshima to manufacture NOR flash memory. The formal signing finalizes the letter of intent announced in July of this year. The agreement will give Numonyx access to increased 300 mm capacity while reducing the costs to make high-density NOR flash commonly used in mobile phones and embedded applications. The companies have begun technology transfer and development activities for Elpida’s Hiroshima Plant and are planning to have initial production in the middle of next year. Elpida will allocate a portion of the plant’s extensive capacity of approximately 120,000 wafers per month to Numonyx for the production of both 65nm NOR flash products as well as NOR flash products on the upcoming 45nm process technology.

Panasonic Corp. (PC) and Renesas Technology Corp. have co-developed technology for the mass production of next-generation 32-nanometer system chips. Beginning in 2011, the technology is expected to be applied to mass-producing chips used in cellular phones and digital home electronics products. An increase in power consumption has been an obstacle to miniaturization. But new materials have made it possible to hold power consumption for 32nm chips to the same level as 45nm chips. A metal oxide film is used on the insulating layer, instead of a silicon material, while titanium nitride is used on the conducting layer.

Tokyo Electron Ltd. (OTCPK:TOELF) said orders for its machines to make chips and flat panel displays rose a quarterly 0.3 percent on rising demand from makers of data processing chips. Chip equipment makers have been long waiting for logic chip makers, such as Intel (NASDAQ:INTC) and Advanced Micro Devices Inc. (NYSE:AMD), to order more of the machines used to coat, etch and heat silicon wafers before they are cut into chips. Quarterly orders at Tokyo Electron totaled 105 billion yen (US$1.1 billion), up a notch from 104.7 billion yen (US$1 billion) in the previous quarter. Of the orders, those for chip equipment rose 14 percent to 83 billion yen. Chip makers are betting on strong sales of data processing chips used in mobile devices such as handheld computers, ultra-slim laptops and smart phones, with Intel preparing to launch Core i7, will run on less power than its tiny and successful Atom chip.


NTT Corp. (NYSE:NTT) and EnterpriseDB, a US-based enterprise open source database company, have entered into a wide-ranging strategic partnership that includes an equity investment in EnterpriseDB by NTT Investment Partners, a wholly-owned subsidiary of NTT. Under the partnership, NTT and EnterpriseDB will collaborate to enhance and extend PostgreSQL and related technologies, in areas such as scalability and high availability, which are important in large-scale distributed database environments in data centers. NTT and EnterpriseDB will also collaborate to drive enterprises, including the NTT operating companies, to adopt PostgreSQL. Other goals of the partnership include studying and developing a solution powered by synchronous replication, which will be released as part of EnterpriseDB's Postgres Plus product family in the near future.

Softbank Corp. (OTCPK:SFTBF) added more users than its rivals on a net basis in September for the 17th straight month. Softbank has attracted subscribers with low call rates and quirky marketing. Its popularity has forced other carriers to cut fees as well, pushing the industry into a fierce price war. Softbank added a net 142,800 users in September, more than industry leader NTT DoCoMo's (NYSE:DCM) 129,700 net new subscribers. Second-ranked KDDI Corp (OTC:KDDIF) gained 74,900 subscribers on a net basis last month while eAccess (OTC:ECLTF), Japan's No. 4 player, added 59,300. Softbank has about 18 percent share of Japan's mobile market. DoCoMo has just below half, while KDDI has around 28 percent.

Media, Gaming and Entertainment

Japan's home video game market contracted during the April-September fiscal first half, declining 21.3 percent from the same period last year to be worth 238.8 billion yen (US$2.3 billion). This was the first year-to-year interim decline in four years, but it followed the rapid expansion that took place in the first half of fiscal 2007, when new game machines were released. Hardware sales dived 33.5 percent to 95.23 billion yen in the first six months. The top game machine was the PlayStation Portable (NYSEARCA:PSP) from Sony (NYSE:SNE) which racked up sales of 1.58 million units. Second was the Nintendo DS from Nintendo (OTCPK:NTDOY). As for game consoles, the Nintendo Wii topped the list with sales of 1.11 million units, followed by the Sony PlayStation 3, which sold 350,000 units, and the Xbox 360 from Microsoft (NASDAQ:MSFT) with sales of 140,000 units.