Sanyo to spin off loss-making chip business

TOKYO, Mar 31 (Reuters) Struggling Japanese electronics maker Sanyo Electric Co. Ltd. said on Friday it planned to spin off its loss-making semiconductor division on July 1, the latest in a series of restructuring steps.

Sanyo, Japan's third-largest consumer electronics firm, has said it was considering a spin-off of the semiconductor unit, which has never fully recovered since an earthquake damaged a major chip factory in Japan in 2004.

Dealing with the chip business is one of the most pressing tasks for Sanyo, which recently formed alliances with Finland's Nokia in mobile phones and Taiwan's Quanta Computer in flat TVs to help it revive its earnings.

Shares of Sanyo closed up 0.9 percent at 323 yen on reports of the move, bucking a flat broader market.

In a statement, Sanyo said it decided to spin off the division because it believed the unit would be more competitive as an independent entity.

Sanyo said the move had already been factored into a business plan announced in November.

As of the end of last March, Sanyo's chip business employed about 17,000 workers and generated 220 billion yen in sales, or roughly 10 percent of group revenues. It has since been cutting jobs and production in the division.

The Osaka-based electronics maker embarked on a sweeping restructuring plan last year, saying it would cut 15 percent of its group work force, close factories, halve its debt and streamline unprofitable business areas.

Sanyo issued 300 billion yen worth of preferred shares this month to Goldman Sachs Group Inc, Daiwa Securities SMBC and Sumitomo Mitsui Banking Corp. to bolster its finances and pay for restructuring.

REUTERS SS SP1352