Dainippon Screen Lifts Offshore Procurement to Cut Costs

Dainippon Screen Manufacturing Co. (7735), a Japanese maker of machines that clean semiconductor wafers, plans to buy more materials overseas including from China to help it return to profit.

Overseas procurement of components for chip equipment will rise to about 10 percent from almost none now, President Masahiro Hashimoto said in an interview in Kyoto yesterday.

Dainippon, forecasting a third annual loss in five years, is cutting costs through reorganizing its supply chain and reducing executive pay amid a slump in personal computer demand that has cut global chip sales. The Kyoto-based company needs to reduce costs by at least 10 billion yen to lower its break-even point as sales may remain sluggish, Hashimoto said.

“We expect to see the effect fully from the second half of next fiscal year,” Hashimoto said. Dainippon is reducing the number of suppliers to boost volume and lower unit prices, he said.

Orders for semiconductor-making equipment in the quarter ending March 31 will be higher than the 29 billion yen ($306 million) in the third quarter, beating the manufacturer’s earlier expectation that they would be unchanged, Hashimoto said.

Demand for machines used in small- and mid-sized liquid- crystal displays and foundries “has been strong,” Hashimoto said. Sales of equipment to make LCDs may rise to more than 20 billion yen in the financial year ending March 2014 from about 12 billion yen this year, he said.

Shares Rise

Dainippon rose 4.3 percent to 435 yen in Tokyo trading yesterday. The stock has fallen 17 percent this year, compared with a 21 percent gain in the benchmark Nikkei 225 Stock Average.

Intel (INTC) plans to spend about $13 billion on new plants and equipment in 2013, more than analysts had projected, it said in January. Intel’s microprocessors run more than 80 percent of the world’s personal computers.

Global chip sales dropped 3 percent last year to $297.6 billion, according to market researcher Gartner Inc.

Dainippon expects to post a net loss of 14 billion yen for the year ending March 31 after a profit of 4.64 billion yen last fiscal year, it said in February. Sales may plunge 24 percent to 190 billion yen.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Robert Fenner at rfenner@bloomberg.net

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