TOKYO -- Tokyo Electron plans to stop making equipment used to manufacture photovoltaic cells, closing an unprofitable business to focus on chipmaking equipment ahead of its planned merger with Applied Materials.
The company will halt research and development on new technologies and reduce its presence in the field over the next two to three years.
It entered the business in 2012, spending 22.5 billion yen ($216.13 million) to acquire Swiss firm Tel Solar, then Oerlikon Solar, the world's third-largest producer of solar cell fabrication equipment. But demand has been soft and sales reached only around 3 billion yen in 2013. Tel Solar has not come out of the red since its purchase.
Tokyo Electron is expected to liquidate the subsidiary, which employs about 400, and is currently working out the details. Another 100 employees at Tokyo Electron's research center in Tsukuba, Ibaraki Prefecture, will be reassigned. The company will continue providing technical support to customers.
According to a December announcement, the firm will incur an extraordinary loss of 46.2 billion yen this fiscal year from writing off solar-cell production equipment facilities and other items.
Tokyo Electron had planned to turn the business into a major earnings source after its mainstay equipment for making chips and LCD panels. At the Tsukuba facility, it developed equipment to make the world's most efficient solar cells, but commercializing the technology proved difficult.
Global demand for solar panels has been recovering after a glut in 2012, but cutthroat competition has slashed manufacturers' profit margins. Even in China, the largest market for production equipment, the government is pushing for a shakeout to shrink the crowded field. Demand for manufacturing equipment is expected to fall.