Panasonic - Sanyo to dominate sector / Creation of massive firm tipped to shake up electronics-manufacturing industry
Written by changthai11 on Sunday, November 9th, 2008
Panasonic - Sanyo to dominate sector / Creation of massive firm tipped to shake up electronics-manufacturing industry
Satoshi Nakagawa,Fumitsuki Funakiand Yasuhiro Takizawa / Yomiuri Shimbun
Panasonic Corp.’s broad agreement on Friday to make Sanyo Electric Co. a subsidiary in spring will lead to the birth of Japan’s largest and the world’s second-largest electronics firm with annual combined sales of 11 trillion yen.
The agreed-upon Panasonic-Sanyo capital and business alliance will create a megabusiness that will cover a wide spectrum of operations ranging from home electrical appliances to the production of environmentally friendly energy.
Growth is expected in two fields: solar batteries–whose global market for corporate and household uses has been rapidly growing–and the production of lithium-ion batteries, a key component of gasoline-electric hybrid vehicles as well as a wide variety of electronic products.
Amid the deteriorating global economy, the planned Panasonic-Sanyo tie-up constitutes a big threat to domestic rivals as the business environment becomes more severe due to such factors as slumping demand for semiconductors and the rise in the yen. The tie-up pact might trigger another round of electronics industry realignments.
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Move to create megabusiness
Panasonic President Fumio Otsubo–in a joint press conference Friday with his Sanyo counterpart Seiichiro Sano–said, “Sanyo has excellent technological capability and merchandise planning ability in the environmental energy field [such as solar cells].”
Stressing the advantage of making Sanyo Panasonic’s subsidiary, Otsubo went on to say, “We’d like to maximize our technological know-how and business resources to further bolster our competitiveness.”
The combined sales of Panasonic and Sanyo are an estimated 6 trillion yen less than the revenues of General Electric Co. of the United States. Nearly 50 percent of GE’s revenues, however, derive from its financial services activities, and the company is in serious financial straits to the extent of needing more than 15 billion dollars in recapitalization.
The Panasonic-Sanyo combination is effectively the world’s largest in the electronics-manufacturing sector, and the capital bases of both of the firms are solid.
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Advantage of cell technology
Sanyo is the world’s leading producer in terms of market share of lithium-ion batteries, demand for which is seen ballooning for use in electronic vehicles, while Panasonic is third.
The collaboration of the two in the growing lithium-ion battery market is viewed by their domestic and overseas rivals, including Sony Corp. as having great potential.
Referring to Sanyo’s strengths, Otsubo said, “Sanyo has been successfully developing its solar cell division, and the market for automobile solar cell modules [that both Panasonic and Sanyo have been producing] will grow explosively,” noting that the solar cell business will be one of the growth engines of the integrated Panasonic-Sanyo entity.
According to estimates by Fuji Chimera Research Institute, a marketing research company, the world’s lithium-ion battery market will expand to 749.2 billion yen in sales in 2012, up 150 percent from the 2005 level.
This is because demand for the batteries most likely will post fast growth, especially over the 2010-12 period, for uses including digital devices such as cell phones and digital cameras, as well as electric vehicles, the institute said.
The scale of the world market for lithium-ion batteries, which are Sanyo’s specialty, is expected to be worth 4.67 trillion yen in 2012, 3.9 times the 2007 figure, according to Fuji-Keizai Group, the parent body of Fuji Chimera.
Germany’s Q-Cells AG has the largest global solar cell market share of 10.4 percent, followed by Sharp Corp., while Sanyo ranks seventh.
Although Panasonic withdrew from the solar battery business in 2000, Sanyo, with the help of Panasonic’s global marketing network, will be well positioned to boost its global share in the solar cell sector.
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Potential for upheaval
The Panasonic-Sanyo alliance will pose a formidable challenge for the nation’s other electronics giants.
Because of the triple woe of the higher yen, hikes in the cost of raw materials and declines in product prices, six of the nation’s eight leading electronics manufacturers saw a drop in their profits in the midterm settlement of accounts for the six months to the end of September.
Toshiba Corp. has seen losses in its semiconductor arm, posting a deficit for the April-September quarter. Sharp, despite good sales of flat-screen TVs, also has experienced falls in both revenues and profits for the first time in seven years, due mainly to a shrinkage of cell phone sales.
Sony has been hard hit by the yen’s appreciation and weakening euro, which have caused the profitability of its digital cameras and other digital devices exported to Europe to be eroded. The firm has revised downward its projected profits for the year ending March 31 to 200 billion yen, a decline from the 470 billion yen projected in July.
An executive of a major electronics company said the adverse climate for the electronics industry “might provide companies that have ample funds such as Panasonic with superb opportunities to take over other firms,” indicating the possibility of a new round of large-scale electronics industry realignment. (Nov. 9, 2008)
