The Japanese electronics industry’s steady implosion continues today (see MT's feature on the whys and wherefores) after Sharp forecast a second year of record losses, and admitted that it is not sure it will be able to stay afloat. The 100-year-old consumer electronics firm said it reckons the financial year to March will show a net loss of $5.6bn, almost twice as much as it predicted in August. The firm has been struggling to get things back on an even keel after huge investment in LCD manufacturing which does not seem to have paid off.
Sharp’s situation has been worsening thanks to a depressed global market for flat-screen TVs, which have resulted in falling sales. In turn, the firm has experienced funding problems because of the ballooning losses, and has reportedly even had to mortgage its HQ building and look for rescue investment. The white knight, Terry Gou, is a Taiwanese billionaire in technology manufacture (his business makes Apple’s iPhone), but the deal has faltered as the two sides bicker over terms.
Panasonic’s predicament is not much better. The loss it is predicting will be the second consecutive year in which it has lost nearly $10bn, and flies in the face of recent predictions that the firm would be in profit again by the time the next results came around. Panasonic said it would not be paying a dividend this year, the first time it has made such an announcement since 1950. The firm said that a major reason for the loss is it is writing down the value of recent investment in lithium-ion battery and solar panel technologies, as well as mobile phones. Previously, the strategy had been to bet big on these areas, but competition from foreign competitors (especially Apple and Samsung in the smartphone market) has seen Panasonic rapidly lose ground.
Unfortunately, though, the problems do not all stem just from write-downs: the firm’s actual sales are falling too. Second-quarter sales were down 12% to 1,823 billion yen compared with the same period the previous year. The company said it was ‘due mainly to sales decrease in digital products under severe global competition as well as weak Japanese markets for flat-panel TVs and global note PCs.’ So Panasonic is losing market share in a shrinking market. Not a good look.
So what on earth is causing such losses for these firms (and their peers)? Well, the Japanese consumer electronics industry in general is having a pretty rough trot. The expensive manufacturing and strong yen in Japan have made exported products to costly for overseas consumers, and have therefore created a disadvantage compared with rival firms in China and South Korea. Not to mention that it is the norm in Japan for tech firms to what to produce a bit of everything, with not much regard for differentiating products from competitors – the Japanese crop of tech firms is pretty homogenous.
But a few bum decisions, such as pulling out of the European market altogether, have no doubt made things harder for Panasonic. And Sharps concentration on LCD manufacturing while the world starts moving towards tablet PCs wasn’t an ideal move either. The litany of woes from Japan’s tech sector continues to lengthen. Next come Sony’s results. We’ll keep you posted.