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Sony to Shift Parts Supplies to China
Sony Corp, the second-largest consumer-electronics maker, will reduce parts procurement from Japanese suppliers and boost purchases from China's mainland, Taiwan region and Malaysia to cut costs, the Nihon Keizai newspaper said.
Of the annual 200 billion yen (US$1.7 billion) of parts Sony buys at home to make audio-visual and other products, the company plans to order half from Asian manufacturers outside Japan, up from 10 percent, said the report, which didn't cite sources. Japanese suppliers will be cut to 1,000 from about 2,500, it said.
Japanese parts makers are suffering as consumer-electronics makers order fewer parts amid a global economic slowdown. While some electronic component makers like Kyocera Corp. are shifting production to China, where labor costs are cheaper, others must follow in that path to remain profitable, an analyst said.
"Finding a new maker and forming a relationship of trust with that maker is really quite a time consuming process" for a consumer-electronics maker like Sony, said Hiroyuki Matsumoto, an analyst at Kokusai Securities Co "So the move won't affect Japanese parts makers right away. They'll have time to think (about their strategy)."
Sony also wants to purchase more parts from other Asian countries for use at US and European assembly plants to help trim its 500 billion yen in worldwide procurement costs by 20 percent, the newspaper reported. The parts are those commonly used like motors and capacitors that regulate electricity flow in consumer electronics, it said.
Officials at Sony couldn't be reached to comment.
Sony has said it expects to weather the global economic slowdown without firing tens of thousands of workers like Japanese rivals because it is already cutting costs and has shut or closed many of its factories.
The maker of the PlayStation 2 video-game console had an unexpected fiscal first-quarter loss for the period ended June 30. The company also cut its full-year group net profit forecast by 40 percent to 90 billion yen amid waning demand for televisions and mobile phones.
Sony's electronics division, which accounts for 75 percent of sales, had a loss in the first quarter on weaker demand for its television sets and other consumer products. The company was also faced with the recall of 1.1 million faulty mobile phones in Japan and early retirement costs at Aiwa Co, a money-losing unit that makes lower-priced cassette recorders and CD players.
"Electronics sales were about 10 percent lower than our projections in April," Sony Chief Financial Officer Teruhisa Tokunaka said on July 26 when Sony announced first- quarter earnings. "Recovery in the electronics industry this year is difficult."
Some suppliers of parts to Sony are already shifting production to China.
Kyocera Corp, the biggest maker of ceramic casings to protect semiconductors, last month announced a plan to increase parts and equipment production in China fourfold by the year ending March 2003 to 105 billion yen.
The Kyoto-based company says labor costs at its parts plants in China are about 1/30th those in Japan.
Source: China Daily
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