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Japan tech giants slump, S. Korean rivals rebound

Mon, 11/02/2009 - 7:05am
Yuri Kageyama, AP Business Writer

TOKYO (AP) – Asia's technology giants are showing mixed signs of recovery, with Japan's electronics makers set to languish in the red this year, while South Korean companies rebound sharply from a global industry slump.

Their diverging fortunes show the strides South Korea has made against Japan in recent years as they compete fiercely for global market share in consumer electronics like flat-panel TVs, cameras and mobile phones. That South Korea's currency has become relatively weaker than the yen of late has only provided an extra edge by making its exports more competitive.

On Friday, Sony Corp. became the latest Japanese technology heavyweight to report red ink last quarter, racking up 26.3 billion yen ($289 million) in losses as plunging sales of its core electronics products eclipsed healthy demand for its PlayStation 3 game consoles and Michael Jackson hits.

While smaller than expected, the loss underlined Sony's hardships as it cuts staff and costs to weather the global slowdown and sliding prices of gadgets. The company, based in Tokyo, is now forecasting a 95 billion yen ($1 billion) loss, compared with the initial projection for a 120 billion yen ($1.3 billion) loss.

The new forecast is marginally better than the 98.9 billion yen ($1.1 billion) loss it suffered the previous fiscal year.

In contrast, South Korea's Samsung Electronics Co. said quarterly profits tripled to a record.

The country's biggest corporation and a world leader in consumer electronics earned 3.72 trillion won ($3.14 billion) in the three months ended September, compared to 1.22 trillion won ($1 billion) a year earlier.

Samsung's result was not an exception for South Korean electronics companies. LG Display Co., which competes with Samsung in LCDs, announced record quarterly sales and a 90 percent surge in net profit. LG Electronics Inc., another rival, said it recorded all-time-high quarterly sales for flat-screen TVs and mobile phones.

Besides Sony, the performance of other Japanese electronics makers paled next to Samsung's.

While faring somewhat better than Sony, Panasonic Corp. barely managed to creep back into the black with quarterly net income of 6.1 billion yen ($67 million), its first profit in a year. That was down 90 percent from the previous year, despite recovering demand for refrigerators and washing machines.

Still, it too projected a loss for the year, though narrower than initially forecast at 140 billion yen ($1.5 billion), compared with 195 billion yen ($2.2 billion).

Japanese rival Toshiba Corp. stuck to its forecast for a 50 billion yen ($549 million) loss for the fiscal year. It eked out a small quarterly profit of 100 million yen ($1.1 million) on cost-cutting and higher sales of memory chips. That marked a reversal from a 26.9 billion yen ($298 million) loss the same period a year earlier.

One main difference between Sony’s and Samsung’s results stems from a more favorable exchange rate against the dollar for South Korea's currency, the won.

The other is that Samsung has its own in-house flat-panel TV production, while Sony gets its panels through a joint venture with Samsung, so its costs are greater, and its ability to make innovations in liquid crystal displays is considerably slimmer.

Sony CFO Nobuyuki Oneda said cost cuts were on track, but a quick turnaround in its TV operations would be tough.

"It would be difficult for us to achieve Samsung's profitability in TVs just by competing in hardware," he said at a briefing, citing the South Korean rival's attractive products, as well as the weaker currency.

Sony needs to roll out more futuristic models such as the 3-D TVs planned for next year to one-up Samsung, Oneda said.

Sony fell behind Samsung in liquid crystal displays, partly because it had grown too complacent about its success in old-style cathode ray tube TV sets.

The strong yen has hurt because it makes Japan's products more expensive in foreign markets and lowers profits made overseas. The dollar had traded at above 100 yen last year but has hovered at 90 yen levels lately.

Sony's quarterly sales plunged nearly 20 percent to 1.66 trillion yen ($18.2 billion) from 2.07 trillion yen ($22.9 billion) the same period the previous year, dragged down by sluggish consumer spending and the rising yen.

Still, a recent price cut was a boon for the PlayStation 3 machine, and Sony sold 3.2 million PlayStation 3 machines around the world during the latest quarter, compared with 2.4 million the same period the previous year. Sony hopes to sell 13 million PlayStation 3 consoles for the fiscal year through March 2010.

– Associated Press writers Kelly Olsen in Seoul and Mari Yamaguchi and Malcolm Foster in Tokyo contributed to this report

More Broadband Direct 11/02/09:
•  RCN Business Services tunes up D3 for SMB market
•  Sprint offers 4G in Chicago, Dallas, N.C.
•  Cable Center adds Bowser, Carlsen, Lind to board
•  Despite weather, economy, 9K flock to Cable-Tec Expo
•  Ericsson to resell Sigma's fulfillment system
•  Ciena offers Carrier Ethernet certification program
•  Alcatel-Lucent's Q3 loss widens to $269M
•  Japan tech giants slump, S. Korean rivals rebound
•  Broadband Briefs for 11/02/09

 

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