Telecommunications

October 2001

Figures released by the Cabinet Office show that semiconductor production in Japan in the ongoing slump has already dropped 41% in the 13 months through August 2001, against a 14% dip in the last slump of January and December 1998.  Hitachi Ltd. will lay off 14,700 group employees and halve capital spending on its chip business. Another negative factor is a downturn in the bandwidth cycle associated with the periodic demand fluctuations in the telecommunication industry. With demand for cellular phones down sharply, especially in Europe, forecasts for global sales in 2001 were cut to 390 million units from more than 500 million, leaving manufacturers with large inventories. The impact of this is expected to hit the material industry as the year progresses.  The final negative factor is the terrorist attacks in the U.S. Many analysts had earlier predicted that U.S. IT demand would begin recovering later this year, but some now believe it will not happen before the end of next year.  Such a long slump in the IT industry poses a serious threat to the stagnating Japanese economy as it could spread beyond the producer goods industry through reductions in capital investment and wages.  Japan's shipments of producer goods are already more than 10% below the previous year's level. If this weakness filters through to the sector making final demand goods, it could create a serious viscous circle.  (October 1, Nihon Keizai Shimbun)