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Thursday, Nov. 1, 2007

First half a mixed bag for electronics makers


Staff writer

Digital products pushed up sales and profits of major electronics makers in the first half of business 2007, but the industry also suffered from tougher competition in the core flat-panel TV business in the U.S. as cheaper off-brand TVs won the hearts of consumers there.

According to business results announced as of Wednesday, Matsushita Electric Industrial Co. and Sharp Corp. posted record sales in the April-September period due to hefty movement of flat-panel TVs and mobile phone handsets, while Toshiba Corp. posted record sales due to strong results in computers and semiconductors.

Sony Corp.'s operating profit jumped to ¥190 billion from ¥6.2 billion in the same period last year thanks to brisk sales of digital cameras and computers.

Strong sales of digital cameras and mobile phone handsets led to a 6.1 percent rise in Matsushita's operating profit to ¥220 billion.

Hitachi Ltd. on the other hand struggled with harsh competition in the flat-panel TV business in the United States but managed to narrow its group net loss to ¥13.1 billion from ¥78 billion in the same period last year.

Hitachi's digital media division, including its flat-panel TV business, suffered an operating loss of ¥50.8 billion. Some of the losses were covered by Hitachi's electric and industrial system division, which raked in ¥63.6 billion in operating profit.

Including Toshiba, companies doing poorly in flat-panel TVs covered their losses with profits from other core businesses.

Toshiba said it suffered a loss in the tens of billions of yen in flat-panel TVs in the first half, but it still posted a group net profit of ¥45.7 billion, up 17.6 percent, thanks to brisk sales of computers and semiconductor business.

Toshiba's earnings in its semiconductor division increased 28 percent to ¥718 billion, while operating profit grew slightly to ¥65.1 billion from ¥64.9 billion.

Competition for flat-panel TVs became fiercer in the first half, especially in the U.S., as smaller companies increased sales, depressing the earnings of the major Japanese manufacturers.

Matsushita, a major plasma TV maker, said its sales in North and South America dropped 7 percent to ¥101 billion from April to September. Global sales, however, grew 10 percent to ¥396 billion.

"Sales for flat-panel TVs over 50 inches increased, but those between 40 inches and 50 inches suffered tough competition" in the U.S., Matsushita Chief Financial Officer Makoto Uenoyama said.

Sony Vice President Fumio Muraoka also said that cheaper off-brand TVs in the U.S. led to tougher sales.

Sony's flat-panel TV business booked an operating loss of ¥21 billion in the three months to September, but sales rose 20 percent to ¥307 billion.

As growth in the digital products market gradually slows, electronics manufacturers are likely to face tougher competition, and this trend is likely to force companies to seek further capital tieups or even mergers with rival companies to survive, analysts say.

In September, Sharp and Pioneer Corp. announced a capital and operational tieup, including a project to expand both companies' display businesses and develop other audiovisual products.

In July, Kenwood Corp. and Victor Co. of Japan said they will merge into a holding company next year to focus on car and audio electronics.

Kazuharu Miura, a senior analyst at Daiwa Institute of Research Ltd., said it was easier for companies to gain profits in the first half because the market for digital products is still expanding.

"But demand will fall after the Beijing Olympic Games next year, which will lead to tougher competition," Miura said. "When companies have more difficulty raking in profit, cases of M&As are likely to increase."



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