By RTT News, October 23, 2013, 10:35:00 PM EDT
(RTTNews.com) - Japanese consumer electronics giant Panasonic Corp. (PCRFY) will slash its 14,000-strong chipmaking workforce by half and possibly sell some of its plants, the Nikkei business daily reported Wednesday.
Japanese consumer electronics companies had previously focused on chipmaking as a core business to boost the competitiveness of their mainstay products. But intense price competition and eroding profit margins due to stiff competition from South Korean companies have now forced these companies to spin off their chipmaking operations.
Panasonic has chip production bases in Toyama and Niigata prefectures in Japan, as well as plants in China, Indonesia, Malaysia and Singapore. Panasonic's chipmaking business recorded sales of more than 400 billion yen in fiscal 2007, but that figure tumbled to 184 billion yen in fiscal 2012.
According to the Nikkei report, Panasonic's workforce cuts, amounting to about 7,000, are likely to primarily impact its overseas plants. In Japan, some employees who did not participate in past early retirement programs are likely be transferred to other divisions.
Further, the Nikkei reported that Panasonic is already in talks to sell some facilities to Israeli chip foundry giant TowerJazz, with a deal likely to be reached as early as this fiscal year.
According to the report, Panasonic's expenses resulting from the workforce reductions are expected to reach 50 billion yen for the year ending March 2014. The company expects to partly offset its impact through improved earnings.
Media reports in early October also indicated that Panasonic has decided to stop production of plasma television panels by the end of the current fiscal year in March 2014 and fully exit the business. Panasonic's plasma television segment has contributed to two straight years of net losses exceeding 750 billion yen through the fiscal year ended march 2013.
In late September, Panasonic said it agreed to sell its healthcare unit to private equity giant Kohlberg Kravis Roberts & Co. L.P. (KKR) for an equity value of about 165 billion yen or about $1.67 billion.
PCRFY closed Wednesday's trading at $9.49, down $0.14 or 1.47 percent on a volume of 138,071 shares.
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