Fujitsu offloads chipmaking to Taiwan
Apes Intel, AMD with TSMC tie-up
Updated Fujitsu has joined the parade of chip-design firms that are passing off all or part of their manufacturing to the giant Taiwan Semiconductor Manufacturing Company (TSMC).
The Japanese megaconglomerate is struggling to put its financial house in order. Earlier this month, for example, it cut contractors' pay by 15 percent. And on Thursday, it announced that it would further cut costs by outsourcing its system chips to TSMC and working with that company to design next-generation chips.
In a related financial realignment, Fujitsu also put the finishing touches on the deal to sell its hard-drive business to Toshiba, announced this February, putting a price of ¥30bn (£205m, $304m) on it and saying that it will be completed by July.
The acquisition of Fujitsu's hard drive division by Toshiba is just the latest in a string of consolidations in that industry. Witness Hitachi absorbing IBM's drive business in 2002 and Seagate glomming onto Maxtor in 2005, for example.
By outsourcing its chip-making to TSMC, Fujistu is in good company. The world's largest chip fabricator is building 40nm graphics chips for AMD and working with Intel on a low-power system on chip (SoC) for mobile devices, based on Chipzilla's Atom processor.
TSMC can use the business. In its financial report for the first quarter of 2009, also released on Thursday, the company said that its net profit of NT$1.56bn (£47m, $32m) was down 94.5 per cent from the same period a year ago, when it earned NT$28.14bn (£572m, $847m).
Alhough those may sound like bleak numbers, they were better than the company had projected earlier. Back in January, TSMC said that it thought that they'd lose money in their first quarter. Instead, the company managed to not only break even, but to make a profit. A small one, to be sure, but any black ink is to be preferred over red. Money-losing AMD should be so lucky.
In fact, TSMC vice chairman F.C. Tseng was positively perky when he recently said that he expects the global semiconductor business to shrink only 20 per cent in 2009 and not the 30 per cent that TSMC CEO Rick Tsai had predicted earlier this year.
And that's the Meltdown. A time when a nearly 95 percent drop in profit and a 20 per cent drop in global sales can be regarded as good news.
And a time when companies such as Fujitsu are busily positioning themselves for the hopefully inevitable day when the clouds finally lift. ®
Update
On Thursday, Fujitsu also reported its financial results for its 2008 fiscal year ending on March 30, 2009. Its sagging numbers underscore why it's cutting costs and outsourcing its manufacturing.
The company's net sales for 2008 were ¥4,693bn (£32.2bn, $47.6bn), down from ¥5,330bn (£36.7bn, $54.1bn) in 2007 - a decrease of 12 per cent. Net income nosedived from a profit in 2007 of ¥48bn (£329m, $487m) to a net loss in 2008 of ¥112bn (£771m, $1,140m).
On the plus side, Fujitsu's cash reserves of ¥528bn (£3.6bn, $5.4bn) dipped only slightly from 2007. More importantly, the company concludes that it has hit bottom and will rebound in fiscal 2009 - although only marginally - with projected net sales this year of ¥4,800bn (£32.9bn, $48.6bn) and a net income of ¥20bn (£137m, $203m).
COMMENTS
Yeah I heard that from our HP rep
Where is Matt Bryant? What is his excuse for Tukwila being a year late and Intel taking 3 months to admit it would even be late?
HP has chip designers
HP has to invest in the SX2000 chipset to support Itanic and the new windjammer chipset to support Tukwila . What most people don't realize is Tukwila is late because HP had problems with Windjammer. You dont bring out a new chip when your 95%+ marketshare partner does not have the chipset chip working and Nehalem kills it in the entry space. Intel took the opportunity to add DDR3 memory to Tukwila and the blame for being late. How nice of them.
SGI is gone from the Itanic market. Unisys will not do Tukwila. That leaves Group Bull, Hitachi and Fujitsu who have never sold enough units to justify the expense so I would expect them to not have Tukwila system either.
Re: Are you a bot?
Probably just Matt waiting in his bedroom for Sun related articles so he can leap in with HP FUD!
Sun have used TI for years so there's no reason why Fujitsu shouldn't do similar & have lower (shared) foundry costs to get higher profits on chips made. AMD are doing the same with GlobalFoundries spinoff, hoping someone else leaps in, I think IBM may be in with them already.
As comparison HP sold off their entire chip designers in 2004 to Intel, they don't even design any more let alone spin out the FAB to a third party, getting close to Dells model as an assembler.
When you own the OS you own anything that wants to run it
Oracle has Fujitsu by the balls and they know it. Sun's mismanagement is being replace by Oracles profit engine. A big portion of that $1.5B in profit the first year is coming from Fujitsu.
Biggest conglomerate?
is the chinese government, annexing every last inch of soil and beyond...
