OSAKA -- Panasonic will withdraw from TV production in China and Mexico to come full circle on restructuring of an ailing segment that has continued to weigh on profits.
The Japanese electronics manufacturer had announced that it would finish its structural reforms by the end of the current year through March 31. The biggest issue was boosting earnings in the TV segment, which kept losing money over the last six years. The company intends to cut back overseas production by 700,000 units a year, bringing worldwide output down about 10%. Of its five key TV factories, just those in Japan, Malaysia and the Czech Republic will remain after the Chinese and Mexican plants are shut down.
Panasonic expects to sell roughly 7 million TVs worldwide this fiscal year, excluding those under the Sanyo brand. A sharp drop in prices in North America and China, which together account for about 10% of this figure, has forced the company to pull the plug on local production.
The Chinese factory was closed Friday. Panasonic intends to liquidate the 80%-owned joint venture in Shandong Province, with the several hundred workers there likely to be dismissed. It will continue to sell TVs in China by procuring from others the roughly 200,000 units a year that it used to manufacture in-house.
TV production was one of the driving forces behind Panasonic's penetration of the Chinese market. Back in 1978, Chinese leader Deng Xiaoping visited Japan and asked Panasonic founder Konosuke Matsushita for help in modernizing China. This led to the establishment of a joint venture plant for cathode ray tubes in Beijing in 1987. But sales in recent years have slumped partly due to the growth of local manufacturers. Panasonic quit making plasma sets at its Shanghai factory in 2012, and has now ended all TV production in China.
Panasonic is expected to sell the Mexican plant, which has churned out about 500,000 units a year. Most of these sets were shipped to the U.S. It intends to cut losses in that market in part by narrowing the list of consumer electronics retailers that it supplies.
The company plans to focus more on high-resolution models and other high-value-added TVs. The TV business, including supplying panels, logged a loss of 46.5 billion yen ($389 million at current rates) last fiscal year. Panasonic hopes to bring it back into positive territory in fiscal 2015.