Sony, Toshiba to increase chip spending

Struggling electronics firms Sony and Toshiba are all set to increase their spending on semiconductors over the next two years. In a bid to kickstart recovery, these Japanese giants are expected to invest in a wide range of innovative new products to revitalise their businesses, said market research firm IHS.

In 2013, Sony is expected to purchase Rs.44,680.85 crore ($8.4 billion) worth of semiconductors, up nearly 5 per cent from Rs.42,553.19 crore ($8 billion) in 2012, while Toshiba's spending will increase 2 per cent to Rs.32,446.81 crore ($6.1 billion) in 2013, up from Rs.31,914.89 crore ($6 billion) in 2012.

In contrast, spending at the other major Japanese consumer electronics OEMs Panasonic and Sharp, will decline in 2013 and 2014—with Panasonic enjoying a minor rebound of 2.4 per cent in 2014.

"All the Japanese consumer electronics OEMs are struggling financially—prompting them to take measures to cut costs in order to shore up their profits," said Myson Robles-Bruce, senior analyst for semiconductor spending and design activity at IHS.

"But even in these grim circumstances, Sony and Toshiba remain optimistic about the future, and are taking steps to invest in innovative products. This will cause their spending on semiconductors to rise in the coming years."

The major Japanese consumer electronics manufacturers have been negatively impacted by a range of different factors this year, including increasingly difficult competition from South Korean and Chinese rivals.

Because of its financial difficulties, Sony has issued bonds twice this year, to raise funding. This effort comes even as the company has had its credit rating dropped to the lowest investment grade by Moody's.

However, proof that the spirit of innovation is alive and well at Sony and Toshiba was in evidence at the October 2012 CEATEC, Japan's version of the Consumer Electronics Shows (CES).

IHS predicts Sony will bounce back with 3.7 per cent revenue growth in 2013. However, Toshiba will suffer another 1 per cent decline. Declines in 2013 revenue are expected at Panasonic and Sharp as well.

The question remains whether the current downturn will be a long-term trend or if these companies eventually will recover and shine once more.

"The Japanese consumer electronics companies face a changed marketplace, due to the rising influence of Apple and other competitors that have redefined some of the product segments or else simply just taken away share in key areas," Robles-Bruce said. "Based upon the current financial evidence, it appears as though total revenue for Sony might be higher for next year, although estimates for Toshiba actually show a slight decline."

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