Monday, November 4, 2002
First came the layoffs and operational belt-tightening, followed by cuts in capital equipment spending as the high-tech sector fought to stave off a market collapse.
Now, as the industry bumps along the bottom of the worst downturn on record, research and development budgets -- a sacred cow of the balance sheet --are coming under scrutiny at many electronics companies.
"Frankly, the bean counters are back in control," said Len Jelinek, an analyst at iSuppli Corp., El Segundo, Calif. "Early in the year, marketing managers pad their numbers and try to account for all possible sales opportunities. The [financial] controllers let them get away with that in the first couple of quarters because they don't want to miss the sales opportunity.
"Now, it's the fourth quarter and they're looking at their [profits and losses] and saying, 'Oh, my God. What are we going to do? We have to cut discretionary spending, and that means R&D.' "
After arriving at a similarly sobering conclusion, Fujitsu Ltd. this week said it will trim annual R&D spending to $2.4 billion, or 6% of sales, for the fiscal year ending March 2003, down from $2.9 billion, or 7% of sales, last year. For the first two fiscal quarters, which ended Sept. 30, Fujitsu's R&D spending fell from $1.5 billion, or 7.7% of sales, to $1.2 billion, or 6.8% of sales.
"We're still spending a sizable amount in our R&D business, but the cuts are a result of a tough sales period," a Fujitsu spokesman said. "We are looking at ways to make all of our operations more efficient and have made cuts in various areas. R&D is not immune from that."
Analysts said the companies most likely to be evaluating R&D budgets are those in the logic sector. Concerns about low yields at some of the finer line geometries, including 0.13 micron and 90nm, and the cost of transitioning to the new processes has pushed out next-generation technology development.
By: DocMemory
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