TOSHIBA 
By 
By Sachi Izumi
Toshiba, the world's No.2 maker of NAND flash memory, and industry leader Samsung Electronics <005930.KS> are struggling in a near two-year sector downturn, caused by chronic oversupply and weak demand for digital cameras and other electronic gadgets.
Semiconductor makers have slashed output to revive prices, but anemic consumer demand in a deep economic slump has capped price gains, forcing some firms to seek government support.
Toshiba said it would halve capital spending in the year starting on April 1 by delaying construction on two new flash memory chip plants and reining in LCD ramp-ups.
It also plans eliminate 4,500 jobs of contract workers, of whom 500 will be rehired as regular employees in its one profit-making business comprising its power plants and elevators.
But further cuts could limit future growth and market share, analysts said.
"Restructuring alone won't help companies in today's economic conditions," said Masaru Hamasaki, a senior strategist at Toyota Asset Management. "If companies cut jobs or shrink capital spending based on their current earnings level, they risk narrowing their business capacity."
Toshiba has rejigged its operations in the past few years, pooling resources to focus on its NAND flash memory chips -- used in digital music players such as Apple Inc's
The global flash memory market shrank by a third in the last quarter from a year earlier, according to research firm iSuppli.
The electronics group is being hit by a triple punch from the global recession, a firm yen and the chip sector slump, Corporate Executive Vice President Fumio Muraoka said at a news conference.
The company warned of an operating loss of 280 billion yen for the year to March 31, versus its previous forecast for a 150 billion yen profit. It would be its biggest loss ever and its first operating loss in seven years.
For a graphic on Toshiba's results, click on:
https://customers.reuters.com/d/graphics/JP_TSHBA0109.gif
Other technology firms have also buckled under the weight of diving prices and as consumers rein in spending.
Toshiba, whose products include PCs, TVs and refrigerators, reported an October-December operating loss of 158.8 billion yen against a profit of 42.1 billion yen a year earlier.
It posted a net loss of 121.1 billion yen on sales of 1.49 trillion yen.
BLEAK CHIP SECTOR
Domestic peer NEC Electronics Corp <6723.T>, which makes chips for Nintendo Co's <7974.OS> Wii game console and for Toyota Motor Corp's <7203.T> Lexus luxury car, also warned of its fourth straight year of operating loss.
The deteriorating economy slammed prospects for a recovery at the restructuring subsidiary of electronics maker NEC Corp <6701.T>.
It now expects an operating loss of 55 billion yen in the year to March, against its previous projection of a 1 billion yen profit, amid shrinking sales of automobiles, liquid crystal display TVs, mobile phones and other products that use its chips.
NEC Electronics, which posted a quarterly operating loss of 16.2 billion yen, said it would cut costs by $890 million over 2 years, eliminating 1,200 contract jobs.
Samsung Electronics Co <005930.KS> logged its first ever quarterly loss this month, thanks largely to big losses from its chip unit.
The situation for dynamic random access memory (DRAM) chips, mainly used in PCs, has been even worse.
Last week, German chipmaker Qimonda, which controls about 10 percent of the global DRAM market, became the first major chipmaker to file for insolvency.
Talks to consolidate Taiwan' chip sector are heating up. Japan's Elpida Memory <6665.T> is discussing a possible merger with Powerchip <5346.TWO>, ProMOS Technologies <5387.TWO> and Rexchip.
Toshiba, which like its rivals is cutting output, said it would buy part of U.S. partner SanDisk Corp's
Ahead of the results, Toshiba's shares closed up 3.5 percent and NEC Electronics edged up 0.3 percent while the broader market rose 1.8 percent.<.T>
($1=90.08 Yen)
(Additional reporting by Mayumi Negishi and Aiko Hayashi; Editing by Michael Watson)
