Sony, Sharp highlight Japan electronics woes

Sharp, Sony hit by strong yen
Sharp, Sony hit by strong yen

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Sharp, Sony hit by strong yen 00:06

Story highlights

  • Sony issued a profit warning Thursday that rebound will be small f
  • Sharp widended its full-year loss forecast more than eight-fold
  • Both invested heavily in flatscreen display TV production
  • Japan makers can't compete on price of South Korea and Taiwan rivals

A profit warning from Sony and a massive loss forecast from Sharp have highlighted the depth of the problems facing Japan's consumer electronics industry, beset by an expensive yen and evaporating competitiveness in televisions.

Sony, which is coming off a Y457bn ($5.8bn) net loss for fiscal 2011, on Thursday said that a promised rebound this year would be smaller than it initially expected.

Sharp, meanwhile, widened its full-year net loss forecast more than eightfold, to Y250bn from the Y30bn it predicted in May, and said that it planned to eliminate 5,000 jobs -- its first workforce reduction since 1950.

Japanese tech groups such as Sony and Sharp had invested heavily in production facilities for liquid crystal TV displays, only to find themselves unable to compete as prices for flatscreen sets plunged. The yen's 50 per cent rise against the currencies of Japan's trading partners since mid-2008 has made them that much more vulnerable to cheaper Taiwanese and South Korean producers.

Sony cut its net profit forecast for the year to next March by a third, from Y30bn to Y20bn, blaming weak demand for TVs and a persistent rise in the yen's exchange rate, particularly against the euro. Sony derives about a fifth of its revenues from Europe, more than other Japanese electronics groups.

For the first quarter to the end of June, Sony reported a net loss of Y24.6bn, worse than the Y15.5bn deficit it suffered in the same period a year earlier. The loss reflected restructuring charges of about Y11bn connected to its ailing TV manufacturing division.

Osaka-based Sharp has fallen on especially hard times as a result of its narrower focus on TVs, from which it derives about three-fifths of its revenues. In March, it struck a deal to sell a 10 per cent stake in itself for Y67bn to Hon Hai, the Taiwanese contract manufacturer of everything from Apple iPods to Sony PlayStation video-game consoles.

Sharp said that the job cuts, equivalent to nearly 10 per cent of its global workforce, were part of a restructuring designed to save it Y100bn a year.

"Without this restructuring, there will be no future growth for Sharp," said Takashi Okuda, the company's new president. His predecessor resigned this spring over worsening losses.

In shrinking its workforce, Sharp follows other companies in a sector once famed for consistent profits and rock-solid job security. Sony and Panasonic are both cutting thousands of jobs and selling or closing factories.

Japan's tech sector reporting period had got off to a better start on Tuesday, as Panasonic reported its first net profit in six quarters. Panasonic reported the biggest loss -- Y772bn -- in the sector last year, and the heavy restructuring charges it absorbed then, also to address an unprofitable TV business, appear to be starting to pay off.

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