Toshiba to Close Three Chip Plants as Demand Slacks for TVs & PCs

Toshiba Logo<November 30, 2011> Toshiba Corporation said today in Tokyo that it will close three of its six factories in Japan producing so-called discrete or single-function chips which are widely used in the electronics business. A very competitive part of the chip business, Toshiba has struggled to maintain profits in this division as competitors such as Samsung put downward pressure on the pricing – and profits – for these chips.

But the biggest reason for cutting back production is the worldwide slump in demand for those electronic products like TVs and PCs that make use of these chips. The combination of slumping demand, competition from Samsung, and the yen appreciation making it increasingly difficult to compete forced Toshiba’s hand to deal with this eroding business.Toshiba Factory

“It’s because demand is so weak,” analyst Yoshiharu Izumi at JP Morgan in Tokyo told Reuters. “There is the high yen, cutback by domestic setmakers, especially Sony and Panasonic, and PC sales are weak around the world.”

The three plants will be closed in the first half of the next fiscal year beginning April 1, 2012. These factories are located in the Fukuoka, Shizuoka, and Chiba prefectures.

Notably, the Fukuoka plant is the oldest working factory in Japan bearing the Toshiba name. Toshiba built the factory in 1920 and it is their oldest operating factory.

This move by Toshiba will cause the relocation of at least 1,700 workers. The company says that they plan to relocate the workers to group companies.

Bloomberg is also reporting that Toshiba will cut production output of both discrete chips and system LSI chips amid a worldwide cutback in demand due to sluggish U.S. and Europe economies.

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