Japanese Spending Less Citing weak IC sales, Mitsubishi forecasts loss By David Lammers, EE Times Tokyo -- Mitsubishi Electric Corp. is confronting red ink on its bottom line for the first time. Citing weak sales of semiconductors and price competition in the North American market for audio/visual products, the venerable Japanese giant has forecast an after-tax loss of about $80 million for its 1998 fiscal year, which ends March 31. For the half-year ending Sept. 30, the company expects to lose about $208 million. Mitsubishi's prediction--and a warning by Sharp Corp. that its profits will likely decline for the first time in five years--appears to run counter to a recent report by the Electronic Industries Association of Japan (EIAJ) that upwardly revised its 1997 electronics-production forecast to a 9.6 percent increase for the year. Despite the EIAJ's upbeat outlook, it appears clear that the slowdown in personal spending in Japan's domestic economy is having its effect on the electronics industry here, even as exports shoot upward. Sales of personal computers to the home market in Japan turned downward late last year and worsened after the government raised the sales tax April 1. A Fujitsu Ltd. spokesman said sales of large computers are holding up as corporations invest in information-processing equipment. But PC sales by Fujitsu will increase by only about 10 percent this fiscal year, much less than had been hoped for, he said. Analysts have pointed to a yawning gap in PC prices: Japan's largest PC makers have sought to preserve profits by keeping prices above $2,000, even as prices in the U.S. home-PC market have dropped sharply. Personal spending in Japan has fallen across the board as consumers have rebelled against a double whammy: the end of income-tax breaks, which the government had put in place as part of an economic stimulus package, and the increase in the sales tax, from 3 percent to 5 percent. Also, the national health insurance system is being changed to increase individuals' out-of-pocket costs for doctor visits. Peter Wolff, an electronics analyst at Baring Securities, said profits are worsening at some Asian companies because too many of them rely on commodities, such as DRAMs, monitors and other mass-produced items. Sharp (Osaka) said its profits will decline this year, partly because of weaker-than-expected sales of LCDs; those sales will increase only about 16 percent this year, instead of the expected 40 percent. An oversupply of flat panels at the 12.1-inch size is driving panel prices down precipitously. As a result, Sharp expects a 17 percent decline in profits for this fiscal year, to about $330 million, on a 4 percent increase in sales. (Next article) (c) 1997 CMP Media, Inc [This article comes from EE Times in a joint cooperative effort with the Motley Fool. For more articles like it, please look at Fool's Gold every weekend or simply go to the Fool's Gold Mine and page through our back issues, which all have clever and cool EE Times articles in them.]

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