Toshiba said laptop and PC sales were weak

Several giant computer chip and consumer electronics makers are issuing financial results this week, after which analysts hope to have more clues about where the IT sector, and with it the world economy, is heading.

There are few signs of a recovery for consumer electronics firms so far, thanks partly to a price war brought about by a mix of weak sales and technological advances.

Toshiba posted a net loss of 36.8bn yen ($307.5m; �189m) for the period, up from a loss of 18.8bn yen in the same three months of 2002.

Misery all round

Matsushita, the maker of Panasonic branded goods, piled on the gloom with a 22% fall in net profits for April-to-June, hard on the heels of a profits warning from PC maker Fujitsu on Tuesday.

The most significant problem facing the electronics industry is the reduction of prices Matsushita's managing director

Shocked investors wiped 8.3% off Toshiba's shares, 5.3% off Matsushita's and 4.7% off Fujitsu's stock.

The impact helped push Tokyo's hi-tech Nikkei index 2% lower by the close of trading.

"Sales of personal computers and televisions were worse than expected," said Toshiba vice president Sadazumi Ryu.

PC prices had fallen by a fifth, he added. Demand for chips used in digital cameras and mobile phones was firm, but not strong enough to counter the damage.

Toshiba's sales fell 6.2% to 1.12 trillion yen.

Price war

Price cuts, partly forced by competition from Chinese electronics firms, hurt Matsushita's Panasonic brand too, though the firm did well with its top-end DVD recorder models and plasma screen TVs.

Matsushita's managing director, Tetsuya Kawakami, said any attempt to take back market share "would only lead to price competition".

Instead the firm intends to fight to dominate the market for top end goods.

Matsushita's sales declined 1.7% to 1.7 trillion yen in the three months to June compared to a year ago.

Its net profits fell 22% to 2.7bn yen, hurt by losses at its flat screen joint venture with Toshiba. Operating profit rose, but fell short of analysts' expectations.

Still optimistic

Both firms were cautious about the outlook.

"Signs of economic recovery emerged as the quarter progressed but the overall business environment remained severe," Toshiba said.

"The most significant problem facing the electronics industry is the reduction of prices," said Matsushita's Mr Kawakami.

The only bright spot was that the busiest period of the year is still ahead - electronics firms get most orders in the July to September period ahead of the Christmas sales season.

For now, both Toshiba and Matsushita are sticking to their full year forecasts.

Among the IT giants reporting figures this week are Japan's number two chipmaker NEC and office equipment firm Canon.

Taiwan's United Microelectronics, which is the world's second-biggest supplier of made-to-order chips, is also due to deliver its earnings and outlook for chip demand.

Semiconductor production equipment makers Tokyo Electron and ASM Pacific Technology also have figures coming out.