Fujitsu 2008 Annual Report Download - page 84

Ubiquitous Product Solutions
Sales in this segment in fiscal 2007 reached ¥1,188.9 billion
(US$11,889 million), up 6.3% from fiscal 2006. Sales in Japan rose
7.2% amid solid demand for PCs and a growing market for
mobile phones. Sales outside of Japan increased 4.8% on the
back of higher sales of notebook PCs, primarily in North America
and Asia, as well as strong sales of HDDs for notebook comput-
ers, where we set a new record in unit sales.
Segment operating income rose ¥10.9 billion, to ¥52.5 billion
(US$525 million). (Excluding the impact of accounting policy
changes, operating income would have been ¥54.2 billion
(US$542 million), up ¥12.6 billion.) Profitability in our PC business
was boosted by increased sales and lower component costs,
combined with enhanced cost efficiency. With respect to HDDs,
conditions in the second half of the year improved as we
launched a new perpendicular magnetic recording model and
benefited from the alleviation of price declines for HDDs used in
notebook PCs. However, sharp price decreases in the first half of
the period had a negative impact on full-year earnings.
Despite signs of stabilization buoyed by rising demand for
PCs, competition in the market for HDDs for notebook PCs remains
intense. In 2.5-inch HDDs, we developed two new models
launched in May 2008—a 500GB model offering the highest
capacity of any 2.5-inch HDD on the market, and a 320GB model
with a built-in encryption function. We will continue honing our
competitiveness in HDDs by targeting further cost reductions and
launching a steady stream of innovative products.
In PCs, Shimane Fujitsu Limited, our PC manufacturing sub-
sidiary in Japan, passed the cumulative production milestone of
20 million computers during the year. We will continue pursuing
further improvements and efficiencies throughout our PC opera-
tions, from manufacturing to distribution. At the same time, we
will seek to create a manufacturing organization that can quickly
meet market needs with high-quality offerings, and consistently
deliver products that guarantee customer satisfaction.
In January 2008, we established a new company by consoli-
dating the parent company’s mobile phone production manage-
ment division and customer service center with the manufacturing
and maintenance divisions of several subsidiaries, including
Fujitsu Wireless Systems Limited, a wholly owned company. By
strengthening the Fujitsu Group’s mobile phone production and
maintenance organization, we aim to become more responsive
to customer needs and enhance the quality of our services.
Device Solutions
This segment reported a 4.5% year-on-year increase in sales, to
¥796.7 billion (US$7,967 million). Despite sluggish demand for
standard technology logic devices, sales in Japan increased 14.1%.
This was due to expanded production of 90nm advanced tech-
nology logic devices at the Mie Plant Fab No. 1, as well as increased
sales of flash memory devices following the start of contractual
production at facilities purchased from Spansion Japan Limited.
Sales outside of Japan declined 9.9%, largely due to lower billings
through the Company’s overseas sales subsidiaries following a
realignment of our overseas flash memory sales organization.
Segment operating income totaled ¥18.2 billion (US$182
million), mostly unchanged from fiscal 2006. (Excluding the
impact of accounting policy changes, operating income would
have been ¥7.9 billion (US$79 million), down ¥11.0 billion year
on year.) Despite benefiting from increased sales of advanced
technology logic devices for our LSI device business, operating
income was impacted by higher depreciation expenses associ-
ated with the production launch at Mie Plant Fab No. 2, which
uses 65nm process technology, as well as a delay in the rebound
of demand for standard technology logic devices. The profitabil-
ity of our electronic components business declined due to the
yen’s sharp appreciation at the end of the fiscal year, as well as
intensified price competition and higher upfront investments.
To strengthen our integrated production and sales business
structure, in October 2007, we transformed Fujitsu Devices Inc.
into a wholly owned subsidiary through an exchange of shares.
We then changed that company’s name to Fujitsu Electronics Inc.
and consolidated our sales division into it, thereby integrating
our sales organization under one roof. In March 2008, we inte-
grated the development and mass-production prototyping func-
tions for advanced process technologies (90nm-generation and
beyond) at our Mie Plant. In addition, we reorganized our LSI
operations into an independent, wholly owned subsidiary, Fujitsu
Microelectronics Limited, in order to create an organization capable
of rapid and timely management decisions. In addition to our core
082 MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS
ANNUAL REPORT 2008FUJITSU LIMITED