SMM to Implement Structural Transformation in Material Business

Sumitomo Metal Mining (SMM) announced on Monday the firm implements structural transformation in its Material Business unit, focusing management resources on environment and energy sectors. The restructuring involves the withdrawal from bonding wire business since the profitability has seriously worsened under tough price competitions. SMM also withdraws from lead frame production in Thailand and subtractive COF (chip on film) production in Taiwan. SMM will post extraordinary loss related to these business withdrawals at total 8 billion yen on fiscal 2011 (April 2011-March 2012) financial accounts.

SMM concentrates management resources on market growing material businesses such as lithium nickel oxide which is a positive electrode material for automotive lithium ion battery or sapphire substrate which is applied to LEDs (light emitting diodes).

SMM has produced and sold gold bonding wire at the parent company’s Semiconductor Materials Division and the subsidiaries those which are Okuchi Electronics, Taiwan Sumiko Materials, Malaysian Electronics Materials and Sumitomo Metal Mining Electronics Materials (Shanghai). The profitability has worsened under severe price competition with Asian competitors.

In addition, the users have rapidly shifted to copper bonding wire since gold market price has surged in recent years. SMM has undertaken development of copper bonding wire but could not found the path for the future business growth. The firm decided to terminate the production in June 2012. The firm will post extraordinary loss at 3 billion yen in fiscal 2011 related the withdrawal from bonding wire business.

Lead frame production in Thailand has suspended since October 2011 due to flood. Flood abated at the end of November but SMM decided not to recommence Thai operation since alternate production is possible in other productive sites and restoration of Thai site would take a long time. SMM becomes to produce lead frame at six sites in Japan, China, Taiwan and Malaysia. Extraordinary loss related to the flood damage and the business withdrawal will total approximately 2 billion yen.

As for COF production at Sumiko Electronics Taiwan, another subsidiary in Taiwan, the subsidiary terminates subtractive COF production and concentrates in semi-additive COF production. Semi-additive method is to process copper circuits by copper plating on a polyimide film, which is adoptable to super precise wiring for liquid crystal panels. This withdrawal costs 3 billion yen.