NEW YORK -- 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 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.
Sony did make a great comeback with their high-end digital cameras in the last few years, and lot of photography fans loved them.
But that "camera buff" population isn't growing, and even if it did, that market certainly wouldn't be able to make up for the loss of the company's huge TV business.
You are absolutely correct about Panasonic's lithium-ion battery business.
Panasonic is supplying lithium-ion battery cells for Ford Motor Company’s two hybrid and two plug-in hybrid vehicles. So, they are NOT abandoning that part of the lithium-ion battery business and they are rightly seeing future in it.
I thgought Sony did a really smart move when they got into high end digital cameras, adopting the Carl Zeiss T* line of lenses previously used by Kyocera's Contax brand. Actually, I wondered why companies like Kyocera (Contax and Yashica cameras) didn't themselves aggressively get into digital photography, since the tea leaves were pretty clear on that too?
So the fact that Sony jumped in seemed smart. And their full size 24 X 36 mm sensors in the top of the line SLRs was superb.
The problem MAY be, though, that with cameras now in every cell phone and smart phone, perhaps people have dumbed down to accepting mediocrity, as they have also done with audio. It's a shame, if this is what's keeping Sony camera sales down.
What to make is one thing, whom to sell to is another. Europe is in trouble, US is slow, and they just picked a fight with the Chinese at this very moment, when they need the Chinese to make it cheap and buy it dear, like Apple is doing.
I visited Sharp's LCD factory in the early 1990's. At that time they had some of the best LCD technology around. And they had five year plans for where their product lines were going. But what I remember most about the visit was the hospitality and politeness of the people. I'm really hoping to see these companies emerge from their present difficulties and be the vibrant players that they have been in the electronics market.
Out of the 3 areas proposed by Panasonic (solar, lithium-ion batteries and appliances) I would only put my money on batteries...solar is effectively dead without government subsidies, solar energy can't compete with natural gas..appliances is modestly growing market and smart appliances are over-hyped...but everyone needs better batteries! electric cars need better lithium-ion ones but it gets bigger if IoT takes off every gadget will need one as well (energy harvesting gets you only so far, actually this is where solar might play a role)
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