NEC Corp. plans to spin off its loss-making semiconductor division in November into a separate company as it prepares the unit for an initial public offering, the Tokyo company announced Thursday.
In its first fiscal quarter, the division lost NEC ¥3.2 billion (US$27 million as of June 30, the last day of the period reported), although it enjoyed a 3.6 percent increase in sales to ¥229.4 billion during the same period, NEC said in its first quarter financial report the same day.
In the last fiscal year, the division failed to return a profit in all four quarters as sales of semiconductors slumped worldwide and the cost of conducting research and development to push technology further increased. NEC said earlier this year that it would spin off the division and Thursday's announcement provided details of what is to be done.
The new company will be called NEC Electronics Corp. and will be incorporated on Nov. 1 with a staff of around 24,000 people. It will include all of NEC's semiconductor operations with the exception of NEC's stake in Elpida Memory Inc., a DRAM (dynamic RAM) production venture established jointly with Hitachi Ltd. The new company will initially focus on production of LSIs (large scale integrated circuits), one of the few areas of the semiconductor industry where customer demand remains high and the outlook appears promising.
When NEC Electronics is formed later this year, NEC will hold 100 percent of the shares, but said it will prepare the new company for an initial public offering "as quickly as possible."