Toshiba Corp <6502.T>, Japan's biggest chipmaker, expects its operating profit to rise by 25 percent in the year to March 2012, roughly in line with market expectations, but warned that potential power outages could jeopardize that outlook.
Toshiba rushed to secure key supplies following the March 11 quake and tsunami in northeast Japan and is eyeing normalized production by the October-March second half of the financial year. It hopes to win back clients who may be planning to reduce dependence on Toshiba chips.
But Prime Minister Naoto Kan's call for the closure of the Hamaoka nuclear plant in central Japan, operated by Chubu Electric Power Co <6502.T>, could affect electricity supplies and disrupt production at Toshiba's key Yokkaichi plant in the region.
A power outage of even a few hours can have a huge impact on the semiconductor industry, which needs high-tech clean rooms for manufacturing. Further disruption could provide a windfall for rivals Samsung Electronics <005930.KS> and Hynix Semiconductor Inc <000660.KS>.
Semiconductor production equipment requires steady voltage and power frequency, said Yoshihiro Shimada, chief analyst at SPI Analysis.
Toshiba, like other Japanese firms, is hurrying to procure generators, but the equipment is scarce and fuel is expensive. I don't know how many hours of reserve power they can secure.
Toshiba Senior Executive Vice President Fumio Muraoka said he could not comment on the impact of a shutdown of the Hamaoka nuclear plant without more information on when it would occur and how far Chubu could rely on thermal plants.
Chubu has said it can meet peak demand even if Hamaoka shuts, but relying on thermal plants could lift costs and a hot summer could still mean power outages that could hit chip production.
Toshiba expects to earn an operating profit of 300 billion yen ($3.7 billion) this business year, in line with the Thomson Reuters Starmine SmartEstimate figure of 298.3 billion yen, which puts more weight on recent forecasts by top-ranked analysts.
It said profits from its chip operations would more than double to 140 billion yen this year, but the guidance does not reflect the risk of a Hamaoka plant shutdown.
Toshiba also faces new risks in its own nuclear power business, with Japan reviewing its reliance on nuclear power as engineers struggle to control radiation leaks at the Fukushima plant of Tokyo Electric Power Co <9501.T>, which had its cooling systems knocked out by the tsunami that followed the March 11 earthquake.
But the Fukushima crisis could also mean new revenue to maintain existing nuclear plants. Toshiba expects its power and industrial system business to grow 30 percent this year to 107 billion yen.
There may be delays due to enhanced safety guidelines, but so far we don't see major changes in nations' long-term stance on nuclear power, Muraoka said.
Toshiba's quarterly operating profit in January-March was 98.0 billion yen, in line with market expectations after the company flagged its earnings last month.
Prior to the quake, Toshiba was hit by a power outage at its Yokkaichi plant on March 8, causing the first loss on its chip operations in seven quarters.
After the quake, which knocked out suppliers and temporarily halted production of Toshiba's mobile displays and chips used in home appliances, SanDisk Corp and major client LG Electronics Inc <066570.KS> said they would diversify chip suppliers away from Toshiba.
Prior to Monday's announcement, Toshiba shares fell 1.4 percent against a 0.3 percent fall in Tokyo's electrical machinery subindex <.IELEC.T>.
Since the quake its shares have fallen 11 percent, against a 6 percent fall in the subindex.
($1 = 80.630 Japanese Yen)
(Reporting by Mayumi Negishi; Editing by Michael Watson)