Tech firms brace for painful '09

By Kiyoshi Takenaka

LAS VEGAS (Reuters) - Top technology companies came to Las Vegas to show off their latest innovations in consumer electronics, but despite the plethora of TVs, computers, phones, cameras and other gadgets on display, it was clear the industry is bracing for a very tough year.

While there were a few bright spots at this year's subdued Consumer Electronics Show -- such as low-cost mini-laptops known as netbooks -- what emerged was a picture of scaled-back investment plans, more job cuts and stagnant growth with no signs of improvement.

The global economic slump hit at a time when the growth momentum of flat-screen TVs and digital cameras, which drove the sector's expansion in recent years, had already started to lose steam amid high penetration rates in developed countries. That left tech firms with no star products to fall back on.

Asked when the electronics industry was likely to recover from the downturn, Shutoku Watanabe, executive vice president of Hitachi Ltd's consumer business group, said: "I wish you could tell me."

"We'd probably better mentally prepare ourselves for two more years of this," he told Reuters in an interview, in which he said Hitachi was likely to miss its annual LCD TV sales target by as much as 10 percent.

According to estimates from industry watchers IDC, Gartner and DisplaySearch, the global PC, microchip and flat-TV markets will all contract in 2009 in value terms as the protracted economic downturn dampens consumer and corporate spending.

"I don't think there is any one product that is going to help everybody pull out of the situation," said DisplaySearch analyst Chris Crotty, who attended the show ending on Sunday, where high-tech companies from Microsoft Corp to Palm Inc unveiled their latest products and strategies.

"Unfortunately, when you have an economic downturn coupled with slowing demand, it's a combination that weakens the industry," Crotty said.

Before CES, a slew of technology companies had already announced sweeping job cuts: chip maker Micron Technology Inc said in October it would cut 15 percent of its global workforce of about 19,000 people, while Sony Corp plans to eliminate 16,000 jobs and reduce its network of 57 manufacturing sites by five or six.

At CES, a senior executive at Seagate Technology told Reuters the world's largest hard-disk drive maker plans to cut around 10 percent of its U.S. workforce, amid sluggish demand for PCs and other electronic products.

"We are preparing for a pretty tough environment here over the next 12 months" said Brian Dexheimer, president of Seagate's consumer division, joining a growing list of high-tech companies that are reducing headcount to save costs.

DRASTIC STEPS

The steep slowdown in tech demand hit manufacturers just when they were accelerating output expansion, and now they are scrambling to cancel or downscale aggressive investment plans.

While some companies such as LG Electronics Inc said it was important to continue to innovate and invest in research and development during a downturn, analysts do not expect any large-scale spending by tech companies this year.

Panasonic Corp, the world's largest plasma TV maker, said it would cut its capital spending on its new plasma and LCD panel plants by 23 percent to 445 billion yen.