Panasonic, the Japanese electronics group, warned it would suffer a Y420bn ($5.3bn) net loss this year as it embarked on a costly restructuring of its lossmaking television business.
The company had previously forecast a Y30bn profit for the financial year ending next March. But Fumio Ohtsubo, president, said rapidly deteriorating conditions at the TV operation had forced it to scale back production and write off past investments in the sector.
The decision marks a strategic reversal for a company that has continued to pour resources into panel and set production, even as rivals such as Sony have cut back in favour of outsourcing. A strong yen has made it harder for Panasonic to compete with the lower-cost Taiwanese and South Korean groups that now dominate the TV sector.
“Companies round the world have been moving into flat-panel manufacturing, and that has pushed down prices and prevented us from putting our technological advantages to work,” Mr Ohtsubo said on Monday.
Panasonic is to slash panel production capacity by almost half by 2013, from 13.8m units to 7.2m, by closing or merging production lines in Japan, cancelling plans to expand output at a Panasonic-owned factory in China and outsourcing lower-end models to contract producers.
Panasonic and other Japanese groups pioneered the manufacture of thin plasma and liquid-crystal TV displays more than a decade ago, but high production costs mean they have struggled to compete as the technology has spread beyond its initial luxury niche. Panasonic has created additional problems for itself, some experts say, by focusing on pricier plasma technology rather than LCD.
In the three months to Sept 31, revenue at Panasonic’s audio-visual products division, which includes televisions, fell by 17 per cent, helping to drag the company to a Y106n quarterly net loss. It cut its forecast for TV sales this year to 19m from 25m.
In April, Panasonic announced plans to reduce its workforce by 17,000, or almost 5 per cent. On Monday it said it would complete the job cuts by next year, one year ahead of schedule.
The soaring value of the yen – which prompted the Japanese government to intervene in the foreign exchange market on Monday – has also hurt Panasonic and other groups that depend on export markets. But the impact of plummeting consumer electronics prices has been a bigger problem: in the six months to September, Panasonic said it lost six times more operating profit because of price declines for TVs and other products than it did to exchange rate swings.
The company plans to book Y514bn in restructuring-related charges this year. In addition to the TV business, it is to scale back its semiconductor operation and shift its focus, from general-purpose chips to specialised products such as image sensors. Some of its spare TV panel capacity will meanwhile be retooled for production of screens for smartphones and tablet computers.
Panasonic said the financial pay-off from its reorganisation would accrue from next year, when it expects the TV operation to turn a profit and an overall “restructuring benefit” of Y146bn.