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business have been reassigned to other areas of the Group. Further-
more, the Company has posted ¥37.0 billion in restructuring
charges in line with these business transfers, consisting largely of
losses for the disposition of assets and liabilities, and costs for set-
tling retirement benefit costs due to the transfer of employees to
other companies.
Device Solutions
This segment reported a 26.2% year-on-year decrease in sales, to
¥587.6 billion ($5,997 million). Sales in Japan decreased 28.6%. From
the latter half of the second quarter (July to September 2008) sales
of logic LSI devices were impacted by inventory adjustments trig-
gered by worsening market conditions across a range of fields, par-
ticularly products for digital home appliances and automobiles. The
result was a massive decline in sales of mature technology and
90nm advanced technology logic devices. Sales of Flash memory for
mobile phones and electronic components also declined on chal-
lenging market conditions. Sales outside of Japan declined 21.7%, or
13% if currency exchange rate effects are excluded, largely due to
deterioration in market conditions for electronic components.
The segment posted an operating loss of ¥71.9 billion ($734
million), representing a ¥90.2 billion decline from income recorded
in the previous fiscal year. The rapid decline in the market climate
from the latter half of the second quarter caused losses to expand
rapidly, from ¥4.7 billion in first quarter (April to June 2008), ¥2.5
billion in the second quarter (July to September 2008), and ¥21.1
billion in the third quarter (October to December 2008), to ¥43.4
billion in the fourth quarter (January to March 2009). In logic LSI
devices, lower sales due to adverse market conditions were com-
pounded with a steady decline in capacity utilization rates at pro-
duction lines from the latter half of the second quarter through to
the fiscal year-end. Electronic components also reversed course
abruptly from the previous fiscal year to end in a loss, due to a rapid
weakening in demand and the impact of currency exchange rates.
To cope with the sudden drop in customer demand in the LSI
business, the Group is reorganizing its production framework to
match demand by the end of the current fiscal year (March 31,
2010). This move entails consolidating mature technology logic
device production lines in the Iwate and Aizu Wakamatsu plants in
Japan, increasing efficiency of administrative operations, and reas-
signing approximately 2,000 employees to other positions within
the Group. Accordingly, we posted losses of ¥11.3 billion as restruc-
turing charges for expenses related to facilities terminating produc-
tion in the current fiscal year. Further, we recorded impairment
losses of ¥49.9 billion related to property, plant and equipment in
the LSI business, as there is no sign of a quick recovery in the busi-
ness environment in the current fiscal year. These losses pertain to
advanced technology logic LSI device facilities (buildings and
300mm wafer production facilities at the Mie Plant Fab No. 2), based
on revised future usage plans for these facilities. Along with draft-
ing conservative estimates of amounts deemed recoverable in the
future, we have opted for transition to a business model in which
mass production of 40nm generation advanced technology logic
devices is outsourced.
In March 2009, Fujitsu transferred its capacitor business and
shares in equity-method affiliate Eudyna Devices Inc. In May 2009,
we subscribed to a private placement of shares in equity-method
affiliate FDK Corporation, converting the affiliate into a consolidated
subsidiary. FDK had fallen into excessive debt following losses
posted at the end of the year due to worsening business perfor-
mance and structural reforms. Our decision to take on FDK
Corporation’s excessive debt will enable the company to avoid an
adverse impact that this debt may have had on its business activi-
ties. We also determined that doing so was the best option for main-
taining the corporate value of Fujitsu as FDK’s largest shareholder,
creditor and business partner. FDK’s consolidation means that struc-
tural reforms will take place smoothly as we work to raise the corpo-
rate value of both companies.
080 ANNUAL REPORT 2009
FUJITSU LIMITED
Management’s Discussion and Analysis of Operations