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Business

President kicks off overhaul on familiar turf: chips

Masashi Muromachi

TOKYO -- Toshiba is moving to unload a portion of its semiconductor business to start fixing a shaky profit structure once concealed by creative accounting.

     The Japanese company is nearing a deal to sell its image sensor business to Sony. President Masashi Muromachi, who hails from the semiconductor segment, has decided to start restructuring there first. White goods, personal computers and other underperforming product lines will come next.

     Muromachi has told reporters since summer that Toshiba will no longer hold back on restructuring. It dressed up ailing operations with improper bookkeeping for years, allowing losses to fester.

     Its system LSI and discrete-semiconductor businesses -- the former includes image sensors -- have languished for the past few years. Both lost money in the most recent April-June quarter. Even in NAND flash memory, Toshiba's strongest suit in chipmaking, prices have plunged since April amid slowing growth in China's smartphone market. Its profit margin in flash memory shrank to slightly more than 20% in the April-June quarter from the high 20s in the fiscal year ended March 31.

     Toshiba has little choice but to carry out a sweeping reorganization of its presence in semiconductors. It has turned to Sony, which once sold a portion of its semiconductor operations in Nagasaki to Toshiba, only to buy it back later.

     In LEDs and other discrete semiconductors, Toshiba will seek to narrow its lineup to make operations more efficient and ultimately profitable. It has no plans yet to close any factories as part of this process.

     Some workers at its Oita semiconductor operations in southern Japan would go to Sony as part of the image sensor business sale. The rest would be expected to transfer to Toshiba's Yokkaichi works, a memory production base outside Nagoya. The cutbacks in discrete semiconductors will also entail personnel reductions. Some of the displaced workers would likely be offered early retirement.

     Muromachi hinted to reporters in September that Toshiba may pull out of some businesses in Japan, such as appliances -- a comment that made waves at the company. This raises the possibility of asset sales or early retirement programs beyond the semiconductor segment.

     Muromachi once ran Toshiba's semiconductor operations in Oita. A failed contender for company president in the past, he was relegated to an advisory role at one point before being appointed chairman in June of last year. An independent investigative panel did not implicate him in the accounting scandal that came to light this year. Then-President Hisao Tanaka was accused of involvement. Muromachi became president after Tanaka resigned.

     Given his background in semiconductors, Muromachi appears to be launching his overhaul in that segment to maintain the credibility he will need within the company to take the restructuring further.

(Nikkei)

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