According to Jonathan Soble of the Financial Times, Sony has warned that its television business will probably lose money again this year, in spite of surging sales volume and the introduction of premium features such as 3D and Internet connectivity. The Japanese consumer electronics group’s failure to turn a profit on what had long been one of its best-known products highlights its loss of manufacturing competitiveness to South Korean and Taiwanese rivals.
Under Sir Howard Stringer, Chief Executive, Sony has closed four of its eight TV factories and out-sourced production to lower-cost Asian suppliers, but the resulting cost savings have been offset by plunging prices for mainstay liquid-crystal display sets. Sony’s television business has been in the red since 2003-04 though executives routinely predict its imminent return to profitability.
Hiroshi Yoshioka, Executive Vice President in charge of the company’s consumer electronics divisions, said on Monday that earning money this year would be “difficult” and sought to lower expectations for the unit’s future earning potential. “LCD televisions have become big business, but it’s very tough to make much money in them,” he said. “It’s not an area where we can earn margins of 5 or 10 percent.”
Mr. Yoshioka said the company needed a “new business model” to compete in TVs against the likes of Samsung, the South Korean manufacturer that overtook Sony as the world’s largest flatscreen television maker in 2006. Such a model would incorporate Sony’s strengths in creating and distributing entertainment content, Mr. Yoshioka said. As a step in that direction, he cited Sony’s introduction in October of televisions designed to work with Google’s new Web TV services. That followed the start of 3D TV sales in May – part of a broader push into 3D involving Sony’s video game, film studio and electronics arms.
So far, however, demand for Internet and 3D TVs has been patchy, owing in part to a lack of tailored content. Las week Mike Vitelli, President of Best Buy, said the popularity of smart phones and tablet computers such as Apple’s iPad had diverted some consumer spending away from TVs. Sony’s move to shift more TV production to third-party manufacturers outside Japan has cast doubt on a 2008 deal with Sharp, under which it was to take a stake of up to one-third in the latter’s new $3.5 billion LCD panel factory in western Japan.
Japanese media have reported that Sony has decided increasing its share of the plant above the 7% it currently owns, although Mr. Yoshioka said that “as of today, there is no change to our original plan.” Sony’s problems have come in spite of fast-rising sales of LCD TVs industry-wide, as customers have flocked to take advantage of falling prices. Mr. Yoshioka said Sony would probably “come close” to hitting its target of selling 25 million LCD TVs this fiscal year, an increase of more than 60% over a year earlier.
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