August 24, 2009 / 7:48 AM / 8 years ago

INTERVIEW-Canon to restructure stepper division by Dec

4 Min Read

* Aims to return to trend of boosting profit each yr in 2010

* Plans to continue SED development despite LCD price falls

* Shares close up 6.3 pct vs 3.7 pct rise in sector

By Kiyoshi Takenaka and Reiji Murai

TOKYO, Aug 24 (Reuters) - Japan's Canon Inc (7751.T) said it plans to restructure its loss-making microchip stepper division by December, a move aimed at helping it better compete with ASML (ASML.AS) and Nikon Corp (7731.T).

Canon also aims to return to a trend of increasing profits each year in 2010, Masahiro Osawa, a managing director, said in an interview on Monday.

The company, the world's largest digital camera maker ahead of Sony Corp (6758.T) and Nikon and a major manufacturer of copiers and printers that competes with Xerox Corp (XRX.N) and Ricoh Co Ltd (7752.T), posted its first annual operating profit decline in nine years in 2008.

"We have begun to see some encouraging signs here and there. We would like to make 2009 the floor for our earnings," Osawa said.

Following Osawa's comments, shares in Canon closed up 6.3 percent at 3,720 yen, its high for the day and outperforming the Tokyo stock market's electrical machinery index .IELEC.T which gained 3.7 percent. Canon's microchip stepper division, which also manufactures LCD-making equipment and accounts for around 14 percent of revenue, posted an operating loss of 6.4 billion yen ($67 million) in April-June as chip makers reined in capital investment. "The chip and LCD industries are in the midst of drastic changes...we ourselves are starting to move to transform our business structure," he said, but declined to elaborate.

Canon trails ASML of the Netherlands and Nikon in chip steppers, multi-million dollar machines used to etch circuitry on to silicon wafers to make chips.

Canon last month posted a 72 percent fall in quarterly operating profit, also hit by sluggish demand for office machines and a firmer yen, but raised its full-year forecast by 6 percent to reflect more aggressive restructuring steps and a stronger-than-expected demand for high-end digital cameras.

The restructuring moves included cutting 700 jobs at its chip-making equipment business and absorbing Canon Marketing Japan Inc's (8060.T) chip stepper sales and maintenance operations.

Osawa also said Canon plans to continue development of surface-conduction electron-emitter display (SED) technology despite sharp falls in LCD prices, although more time will be needed for a commercial launch.

SEDs were once seen as promising next-generation flat displays, but steep price falls in LCD and plasma panels have raised concerns over the viability of the commercially untested technology. "I believe SEDs have technological competitiveness. But LCD prices have fallen at a much quicker clip than we had anticipated," Owasa said.

"When it comes to costs and technological expertise for commercial production, we need some time to catch up."

(Editing by Edwina Gibbs)

((kiyoshi.takenaka@thomsonreuters.com; +81 3 6441 1810; Reuters Messaging: kiyoshi.takenaka.reuters.com@reuters.net))

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