Tue, Aug 19, 2003 page11

• Sony to cut number of suppliers

  COST CUTTING The world's second-largest consumer-electronics maker plans to compete with South Korean rivals by reducing the number of parts suppliers

  • BLOOMBERG AND AFP
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  Sony Corp, the world's second-largest consumer-electronics maker, will cut the number of parts suppliers it uses by four-fifths in the next three years to reduce costs and help it compete with rivals in South Korea and Japan.

  Sony will buy parts from about 1,000 companies by the end of March 2007, down from 4,700 now, said Yuriko Nakatani, a spokeswoman for the Tokyo-based company.

  Chief executive Nobuyuki Idei aims to raise profit margins by cutting the cost of making products such as Vaio personal computers, Wega televisions and PlayStation 2 game machines. He has said Sony can learn from the operations of rivals such as South Korea's Samsung Electronics Co, a maker of flat-panel televisions and other consumer electronics products.

  Sony will buy more parts from its biggest suppliers and cut back on smaller ones, Nakatani said, confirming a report published in the Nihon Keizai newspaper over the weekend. The company expects buying more from each supplier to reduce parts prices.

  Sony's decision to reduce suppliers follows earlier moves by competitors in Japan. Matsushita Electric Industrial Co, the world's largest consumer-electronics maker, has cut its list of suppliers to 3,000 as of March 31, from 6,000 a year earlier. It plans to eliminate a further 1,000 by the end of March, the report said.

  Sony aims to raise its operating-profit margin, excluding its financial businesses, to 10 percent by the end of March 2007. It reported a level of 4 percent for the year ended March 31, excluding restructuring costs.

  Idei pledged to revive Sony's profitability after the company's shares plunged 27 percent in two days because of a surprise loss in the three months ended March 31. Group profit in the following quarter fell 98 percent, partly because of slumping TV and game sales.

  Meanwhile, Sony aims to turn China into its second-largest market after the US by 2008, China's state press reported yesterday.

  The company is shooting to increase annual sales in the world's most populous nation to US$4 billion by 2005 and to double that figure by 2008, Hiroshi Shoda, chairman of Sony China, was cited as saying by the China Daily.

  "I'm very confident of achieving this goal," Shoda said, adding that in doing so the Chinese market would surpass that of Japan.

  In order to achieve it, Shoda said Sony would accelerate investment, improve its designs and engineering.

  The Japanese giant's total investment in China has surpassed US$8 billion, which compares with a total of US$5 billion in 2001.

  Sony has numerous operations throughout the country, including technology and manufacturing centers in the eastern cities of Shanghai and Wuxi, and an information systems center in northeastern Dalian.

  To strengthen local development it bought a majority stake in Chengdu Sobey Digital in the southwestern province of Sichuan.

  Sony has an enacted a major restructuring plan as a faltering consumer electronics market saw company profits in the June quarter plunge 98 percent from the same period last year to ¥1.1 billion (US$9.3 million).
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