Hitachi to outsource TV production

Hitachi Limited said on Wednesday it will outsource all television assembly as early as this year as it expects demand to shrink in an increasingly price-competitive market. Hitachi’s plan comes a day after rival Sony Corp said it will restructure its loss-making TV business and consider teaming up with other companies.Japan is teeming with TV makers such as Panasonic Corp, Toshiba Corp and Sharp Corp, all of whom have warned of weak TV sales as they struggle to compete with lower-cost Asian rivals such as Samsung Electronics and LG Electronics.“TVs are an unrewarding business with low margins and little value added,” said MF Global analyst David Rubenstein.“Even Samsung and LG, with larger scales, are struggling with both their panels and TVs. It’s a good move to get out.”Japanese firms have clung to their TV operations because TVs, along with white goods and digital appliances, help promote an electronics maker’s brand. But this is becoming a luxury fewer can afford as global competition and a stronger yen erase margins.Pressure to absorb the yen’s strength will push forward overdue consolidation and restructuring in the electronics sector, analysts said.“The yen’s rise is forcing companies to make a choice: consolidate and outsource or go bust,” said Akio Makabe, a professor of economics at Shinshu University. “Electronics firms especially are being forced to play to their strengths and focus on components that nobody else can replicate, while outsourcing even more assembly abroad.”Hitachi, which started making TVs more than 50 years ago, said it will keep its Gifu plant as its workers there in central Japan to make core TV components, but that outsourcing assembly would help cut costs of its Wooo and Ultravision TVs.It expects the domestic TV market to shrivel to 7 million units in 2012 after it swelled ahead of the switch this year to digital terrestrial broadcasting. The market was about 25.7 million units size in 2010.Hitachi, which has already closed its overseas TV production sites, had just 0.5 per cent of the global flat-panel TV market by revenues in the first quarter of this year, according to DisplaySearch.The company, which analysts say outsources parts of its TV production to Taiwan, expects to sell 1.6 million units in the year to March compared with 1.9 million units the previous year. The outsourcing news helped Hitachi shares recover much of their morning losses to close down 0.9 per cent at 463 yen, outperforming a 2.1 per cent fall in the benchmark Nikkei 225. Hitachi said last week its first quarter profit fell a smaller-than-expected 41 per cent on supply disruptions stemming from the March 11 earthquake. It kept its annual forecast slightly below expectations amid fears of power outages at home and frailty in consumer and corporate demand in the United States and Europe.Sony Corp will pull together plans this month to restructure its lossmaking television business and even consider teaming up with other firms, a senior executive said this week, days after the company cut its full-year net profit forecast.The maker of Bravia TVs and PlayStation games consoles is heading for its eighth straight year of losses in the TV business, as it struggles to compete with lower cost Asian rivals such as Samsung Electronics, and warned last week that losses on TVs could widen this year. Sony will review everything from development and production to sales in its TV division, a Sony spokeswoman quoted Chief Financial Officer Masaru Kato as saying in a newspaper interview with the Nikkei business daily.The plans will be put into practice as soon as possible, Kato was quoted as saying. Sony has already sold off TV factories in Spain, Slovakia and Mexico in the past few years and outsources much production to Taiwan’s Foxconn Technology Group. Sony and Panasonic Corp have warned of weak TV sales, especially in the United States and Europe, following Philips and Corning Inc in highlighting sluggish demand. From / Gulf Today