Panasonic Escapes Chip Business, Sells to Taiwan’s Nuvoton
After announcing the news of ceasing liquid crystal display production by 2021 last week, Panasonic has announced its plans to sell a semiconductor unit to Taiwan’s Nuvoton Technology Corp. The decision comes after continuous struggles for saving the business that has been witnessing losses since a long time.
Sources claim that the sale is intended to cut fixed costs by 100 billion yen ($920 million) before the end of March 2022. This can be achieved only by consolidating various production sites and overhauling the loss-making businesses.
Tough competition from Korean and Taiwanese rivals forced Panasonic to divest most of its chip business, leading to shut down of many units. The manufacturing facilities of some units were shifted to its joint venture with Israel’s Tower Semiconductor
As of now, the semiconductor unit focuses on designing power-management chips and sensors for cars, smartphones and security cameras. Earlier this month, the Japanese multinational sold part of the power management chip business to Japanese firm, Rohm Co.
The ongoing losses are partially due to the drooping economy of China as a result of the prolonged trade war with United States. Seen as a global chip making powerhouse in the 1980s and 1990s, this news has left the industry in deep shock.
For proper execution of the cost cutting idea, Panasonic plans to save 30 billion yen by decreasing personnel costs and 40 billion via exiting money-losing businesses.
The Japan headquartered firm entered the semiconductor market in 1952, via a joint venture with the Dutch electronics maker Koninklijke Philips N.V. Speaking of the new move, CEO Kazuhiro Tsuga said, “the company will “eradicate” all continuously unprofitable businesses by the fiscal year ending in March 2022 and focus on sectors such as batteries and other equipment for cars.”
As per estimates, the net profit of Panasonic Corp might drop 29.6 percent from 2019 reaching 200 billion yen for the current fiscal year. Sales are expected to plunge 3.8 percent reaching 7.7 trillion.
Loosening market share forced the firm to stop the production of LCD panels by 2021, majorly due to the domination of Chinese and South Korean manufacturers in the global market. In a statement released recently, the firm said, “Panasonic determined that continuation of the business would be unviable, faced with a tougher environment in the global market, so the decision was made to stop production.”
The trading session of November 26 showed a move of seven percent at recent price at $8.98. The stock prize marked a change of 746.00 percent from its 52-week minimum price level.
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