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Analysis: Japanese CE powerhouses losing steam

Posted: 06 Nov 2012 ?? ?Print Version ?Bookmark and Share

Keywords:bailout? cost-cutting measures? TV maker?

Junko Yoshida of EE Times discusses the prevailing downward trend among the once mighty electronics heavyweights of Japan.

Sony, Panasonic and Sharp this week outlined their turnaround strategies after posting bleak second quarter financial results with big write-offs. The embattled Japanese companies, however, are scrambling to respond to two simple questions:

1. Is the worst over?

2. What, if anything, will drive their future growth?

The Japanese consumer electronics companies have already made it clear they hope to get out of the money-losing TV business as soon as possible. While they shift their focus from consumer to industrial markets and pitch themselves as developers of "eco" and "smart" products, details remain sketchy and largely unconvincing.

For now, the financial community is not buying their argument and sees little hope in the Japanese electronics companies' future.

Fitch Ratings, a global ratings agency, downgraded Sharp's credit to junk on Friday (Nov. 2). "Fitch does not foresee any meaningful operational turnaround in the company's core business over the short- to medium-term," the company said in a statement.

Similarly, Standards & Poors downgraded Panasonic's long-term debt to BBB, the second-lowest investment grade, from A-. The ratings company cited "huge" losses and a slow recovery outlook.

Undoubtedly, the strong yen has been hurting Japanese companies. But the real dilemma is that none has been able to tell a convincing story about how they plan to return to profitability.

The trio share some core problems, but each has a different story. With Panasonic, the issue is the future of their so-called "eco" products. Sony continues to struggle with its "refocused" core electronics products. But Sharp may have it worst of all. The company appears to have already damaged a relationship with its biggest customer - Apple, delivering small displays for iPads and iPhones much later than promised.

Panasonic's future
Panasonic this week announced a new strategy that includes scaling back manufacturing in Japan, ending overseas sales of mobile phones and curbing investment in solar panels and rechargeable batteries.

Drastic changes are needed to stop the bleeding. Of three segments Panasonic has identified as growing businesses - namely solar, lithium-ion batteries and appliances, it is already making further cuts in two of them.

Under the new plan, Panasonic will cut domestic production lines for rechargeable battery cells by half, while focusing on non-consumer applications. It will also curtail investments in a solar panel production factory in Malaysia.

Meanwhile, it will halt sales of smartphones in Europe this year, even though it only reentered the European market in March.

So, Panasonic, which calls itself a "Green Innovation Company," is finding it much harder to create so-called "Eco & Smart Solutions" as it trims most of its "green" products and smartphones, which could hold a fundamental key to the growth of new smart appliances.


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