December 9, 2008 / 11:51 AM / 11 years ago

Electronics industry axes jobs, sees bleak Christmas

TOKYO/HELSINKI (Reuters) - Sony Corp axed thousands of jobs on Tuesday and bearish comments from Samsung and Texas Instruments added to the gloom in the technology sector as consumers shun the latest gadgets.

Demand for consumer electronics has slumped in the run-up to Christmas — the key sales season — as the financial crisis grows into a broad recession that has already engulfed the U.S., parts of Europe and is dampening demand in emerging markets.

“Consumers have essentially stopped buying,” said Brian Halla, chief executive of chipmaker National Semiconductor. “For the first time in a long time, you think before you buy the new gadget or choose to upgrade your phone.”

Japan’s Sony said it would slash in total 16,000 jobs, of which 8,000 were permanent, scale back investments and pull out of businesses as it aims to cut $1.1 billion in costs out of its ailing electronics operations.

The cuts — the biggest announced by an Asian firm so far in the financial crisis — and other restructuring steps underscore challenges facing Sony, which has fallen well behind Apple Inc’s iPod in portable music and is struggling to make money on flat panel TVs.

Korean electronics giant Samsung Electronics Co Ltd said late on Monday it was cutting its targets for sales, capital expenditures and profit, reflecting an increasingly tough worldwide economy.

The world’s top maker of memory chips and liquid crystal displays (LCDs) is also facing a lengthy downturn in the once-reliable memory market and a rapid margin deterioration in the flat-screen TV sector.

Chu Woo-sik, head of investor relations, said at an investor conference that capital expenditures would drop 2-3 trillion won ($1.4 billion to 2.1 billion) next year.

“At a time when people are worried about losing their jobs and paying their mortgages it is not surprising that the consumer electronics industry is being hit,” said Gartner analyst Carolina Milanesi.

“In the past, when things started to improve, it has also been one of the first industries to bounce back,” she said.

Overnight, chip makers Texas Instruments Inc (TI) and smaller rival National Semiconductor Corp slashed current-quarter revenue forecasts to far below Wall Street expectations as demand for mobile phone and analog chips came to a virtual standstill.

Also smaller chipmakers Broadcom Corp and Altera Corp warned on Monday of weaker-than-expected demand.

“Conditions (are) likely to get worse before they get better,” TI’s head of investor relations Ron Slaymaker told analysts on a conference call.

The DJ Stoxx European technology index was up 2.5 percent by 1250 GMT, helped by strong gains in the biggest company in the index, Nokia, and outperforming a 1.2 percent gain in the broader STOXX 600.

Infineon shares fell 6.3 percent while Ericsson was up 0.6 percent.

Analysts said the industry conditions are now so bad that any further deterioration is likely to benefit the world’s top mobile phone maker as its rivals struggle to survive.

“If the markets go really bad, the competition will have it even worse than Nokia,” said Pohjola Bank analyst Hannu Rauhala.

Shares in top mobile phone maker Nokia rose 4 percent, helped also by Goldman Sachs upgrade to ‘neutral’ from ‘sell’.

The company’s smartphone product portfolio is recovering, reducing product risk in 2009, Goldman analyst Tim Boddy said in a note to clients.

“While macro uncertainty remains high, we believe that Nokia’s ‘survivorship premium’ is likely to expand if the outlook worsens further,” he said.

Additional reporting by Sakari Suoninen in Helsinki, David Lawsky and Jennifer Martinez in San Francisco, with Sinead Carew in New York; Editing by Elaine Hardcastle and Jon Loades-Carter

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