TAIPEI, Dec 9 (Reuters) - Massive job cuts at Sony Corp 6758.T and a bleak outlook from Samsung Electronics 005930.KS mark what may be the beginning of a long winter for one Asia's key sectors, with more bad news likely to follow in coming weeks.
Sony became the region’s highest profile technology company to announce major layoffs on Tuesday, saying it will slash 8,000 jobs and cut production to shave $1.1 billion in costs. [ID:nT7887]
Hours earlier, rival tech heavyweight Samsung said it was cutting its targets for sales, capital spending and profit, reflecting a tough worldwide economy. [ID:nSEO366917]
The Sony layoffs could be just the beginning of a regional wave of job cuts if the global economy continues to slump, hitting demand for TVs, computers and other electronic goods.
“It’s only really getting underway right now,” said Credit Suisse economist Joseph Lau. “It’s not likely to bottom out anytime within the next two to three quarters, so we’ll probably look at at least that much time in terms of further corporations restructuring their workforce and overall financial health.”
The Sony and Samsung woes mark some of the biggest ripples to date in a steady stream profit warnings and other cost-cutting moves by global technology companies including Intel INTC.O, Infineon IFXGn.DE, STMicroelectonrics STM.PA and Texas Instruments TXN.N.
Most have avoided massive layoffs so far, often by taking other cost-cutting measures. But many may soon run out of options and have to follow suit as demand for their products dives in the critical U.S. and European markets.
“If there’s no recovery in demand during Christmas and the Chinese New Year holiday, technology companies will really have to think how they can survive,” said Karen Lin, a fund manager at Taiwan’s Paradigm Asset Management Co Ltd.
“Chances are high companies would start to lay off people to further cut costs. It makes sense for chip companies, especially those have production lines, to cut workforce if their capacity utilisation rates keep falling.”
Up until now, tech firms up and down the supply chain -- many of them losing money -- have avoided actual job cuts in places like South Korea, Japan and Taiwan, where such cuts are sensitive and often go unpublicised even when they happen.
Taiwanese DRAM memory chip makers, struggling in their industry's worse-ever downturn, have quietly been forcing their employees to take unpaid leave for the last few months. They are being joined in that practice by TSMC 2330.TW and UMC 2303.TW, the world's two biggest contract chipmakers.
South Korean memory chip giant Hynix 000660.KS is also taking steps to cut labour costs, including forced unpaid leave, while Samsung and LG Electronics 066570.KS are idling some of their capacity longer than usual at the year-end season.
In Japan, some firms have laid off temporary workers but also have yet to cut full-time staff.
“Samsung and LG are avoiding job cuts and for now just have some employees on longer year-end holidays,” said Kim Ik-sang, an analyst at HI Investment & Securities in Seoul.
“It would cost them more if they cut jobs and try to hire back later. Korean companies can wait and see for the time being before they consider more measures,” he said.
For a FACTBOX on global job cuts, click [ID:nLR45752]
Additional reporting by Baker Li, Kelvin Soh, Gina Chang and Lee Chyen Yee in TAIPEI and So-eui Rhee in SEOUL; Editing by Lincoln Feast
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