Analyst: Sony May Outsource Up To 50% Of Flat TVs

Posted by: Kenji Hall on June 17, 2009

In late January, Sony’s CEO Howard Stringer suggested that he was considering outsourcing flat-panel TVs. Not all, mind you, but just enough that the TV division, which accounts for 10% of the company’s overall revenues, might staunch its losses.

But how far Stringer would go was unclear. In May Sony said it would shut one of two TV factories in Mexico. It had already announced plans to close two others, in Pittsburgh, Pennsylvania and Ichinomiya, in Japan. (Sony has plants in farflung regions—from Japan to Mexico to Slovakia.)

Now Macquarie Securities’ analyst David Gibson has done some digging and come up with an estimate: Sony could outsource up to half of its LCD TVs, from 10% to 20% last fiscal year through March. That’s a big step away from Sony’s traditional obsession with manufacturing the products it sells. Since Stringer took over in mid-2005, Sony has been selling off plants and other unprofitable businesses, such as semiconductor plants and retail outlets. But it had been reluctant to rely on contract manufacturers for TVs because of flat-panel sets are vital to its brand image with consumers.

In a report published yesterday, Gibson predicted that Taiwanese contract manufacturer Wistron would be the biggest beneficiary of Sony’s outsourcing business. Would Sony consider outsourcing all of its TVs?

We do not believe the company will adopt a 100% outsourced assembly given the investment in Slovakia and the need for some local production to minimise taxes in some emerging markets.

This fiscal year through March 2010 Sony could ship nearly 16 million liquid-crystal-display TVs globally, Gibson predicts; the figure could go up to 18.8 million next fiscal year. Sony will probably focus on making the big-screen TVs with all the bells and whistles a gadget lover would desire. The LCD panels inside will still mainly come from S-LCD, Sony’s panel-making joint venture with rival Samsung Electronics. The two recently announced that they were running a second production line there.

Outsourcing should help Sony’s TV business, but Gibson doesn’t think it will solve everything. He figures that though last year’s $1.32 billion loss from TVs could shrink this year, it won’t disappear entirely: this year’s loss is likely to be $580 million.

Reader Comments

DanTe

June 19, 2009 1:47 PM

If Sony outsources it LCD production, how can it hope to maintain it's premium pricing over similar Samsung TV's on the market? I'm not sure about their home market, but American's are sure to know that their Sony TV's are basically Samsung LCD's.

Don't buy Sony

June 19, 2009 6:55 PM

Because sony products fall apart once warranty period expires.

mike

June 20, 2009 12:49 AM

They are a dead company walking anyways. PS3 is so bad. They are at the end of their rope. Its over john its over

Oliver

June 20, 2009 8:25 PM

Sony lost its way a long time ago, its the GM of electronics.

Most products are poorly made, out of date, expensive and really their just trying to capitalize on the old brand loyalty that isn't there.

If their going to outsource their products to a Chinese manufacturer, why would I pay the Sony premium? Cheaper and better quality to buy the Chinese brand and pay their cheaper price.

D

June 22, 2009 3:53 PM

Premium price because they don't manufacture themselves? In case you didn't know, Apple doesn't manufacture ANYTHING themselves and still commands a premium price.

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