A graph showing Sony's sales for 2013-2014

Japanese giants seek new pastures for profit generation

The fiercely competitive consumer electronics sector is squeezing out global players, but a UK engineering group sticks by its business model.

Japan’s consumer electronics giants once dominated the globe. Innovative, ground-breaking and top quality products wowed consumers everywhere, but those days appear to be numbered. Firms like Sony, Sharp, Panasonic and Pioneer are struggling to compete at both ends of the market against the likes of Samsung, Apple and Chinese low-cost manufacturers As a result, these Japanese behemoths have been restructuring their businesses to focus on the areas they believe they can compete in more effectively. Which has also meant pursuing sell-offs, spin-offs and partnerships for some of their operations.

Sony’s Trinitron TVs were once at the cutting edge and its Vaio laptops were all the rage. Now the company is struggling to make money from TVs (as is Panasonic) in the face of competition from South Korea and China. But so far, Sony has signalled its determination to hang on to its TV business, which it considers to be a core activity. However, it has given up on Vaio and is looking to sell the laptop brand.

More significantly for Sony, however, is competition in the smartphone market, where it is suffering losses. So much so, that its CEO, Kazuo Hirai, recently announced that Sony expects to make a £1.3bn loss for the whole group in its full year to the end of March 2015. This loss would be four times its previous estimate of losses for that year - and Hirai put the blame squarely on the struggling mobile phone business. Shareholders had a further shock when he revealed that Sony would not pay out any annual dividend for the first time since 1958.

But while Sony has so far failed to woo consumers with its high-end Xperia smartphones, it is looking to the future with a range of smartwatches, and it is seeking to leverage the popularity of its very successful PlayStation by enabling smartphones to link to the consoles.

Elsewhere, Pioneer has sold its disc-jockeying equipment unit to a private equity group, KKR. The Japanese firm also plans to sell its home audio-visual business to domestic rival Onkyo. Pioneer is gradually moving away from the fiercely competitive consumer market to focus on its more profitable automotive electronics business.

Panasonic is also pulling back from consumer electronics, and is looking to invest more in the automotive and housing sectors. It recently announced plans to buy a stake in Ficosa, a Spanish car-parts maker. Both companies have an interest in developing sensors for driverless vehicles.

Separately, Sharp recently signed a deal to license its branded LCD TV business to Slovakia’s Universal Media, as it too seeks to move away from consumer electronics.

After years of technological and commercial dominance, it seems the Japanese electronics giants will no longer dominate the more sexy but less profitable consumer marketplace, opting instead to plough the more fruitful furrows of high-tech business-to-business sectors.

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