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Electronics firms are moving to revamp their personal computer operations as sales continue to dwindle.

Domestic shipments of PCs in the April-September first half of fiscal 2002 slipped 10 percent from a year earlier to 4.555 million units, according to the Japan Electronics and Information Technology Industries Association.

The number led the association to revise downward the shipment projection for all of fiscal 2002 through next March 31 to roughly 10 million units from the initial forecast of 11.1 million.

Fujitsu Ltd. executive Chiaki Ito, who is in charge of PC operations, said he initially expected sales to recover during the second half of this fiscal year but now thinks they will remain at the same levels as the corresponding period last year, when they took a nosedive.

One reason for the slump is that demand for PCs has run its course in Japan, with the penetration rate reaching almost 60 percent of all households in March, industry officials said.

The business practice of improving product functions without raising prices is also losing its allure, they said.

Computer manufacturers including Sony Corp. and NEC Corp. raised PC prices last spring, following a price hike by U.S.-based Apple Computer Inc. in March as a result of surging component prices. But they lowered them in July and August as the hikes ate away at sales.

Japanese firms are also feeling the threat of U.S. PC powerhouse Dell Computer Corp. and its cut-rate pricing, with some of its models sporting price tags of less than 100,000 yen.

PC operations at most makers are believed to be running at a loss. Japan’s industry leader, NEC, managed to return to the black, but only after cutting 30 percent of its workforce in its PC division.

NEC also plans to shift more manufacturing to China. It now produces 10 percent of home PCs there and plans to raise this figure to 70 percent during the second half of this fiscal year.

Other makers are also striving to cut costs and restructure their PC operations.

Mitsubishi Electric Corp. stopped manufacturing PCs on its own and now gets supplies from NEC and other firms.

Hitachi Ltd. and Sharp Corp. are considering mutual supply of PCs for corporate customers, while Toshiba Corp. plans to build one of the world’s largest laptop factories in China.

It was reported in October that Fujitsu will integrate its PC operations with those of Siemens AG of Germany, creating the world’s fourth-largest PC group.

Japanese PC makers meanwhile continue to toil away to develop products with appeal to consumers.

Sony recently had a hit with its Vaio W PC, a space-saving desktop product with a keyboard, screen and main body that come packaged like a notebook PC.

The model was so popular that production at one point could not keep up with sales.

Ikuo Matsuhashi, an analyst at Goldman Sachs (Japan) Ltd., said some PC manufacturers could be forced out of the market because of cutthroat price wars.

“There could be companies pulling out of the market,” he said, “but even in that case, the situation will remain unchanged, with slim profit margins.”

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