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Hitachi to end TV manufacturing in Japan

January 31, 2012

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Hitachi plans to end in-house production of television sets in Japan.  Both overcrowding in the market and strengthening of the yen have made it difficult for the company to compete in a low profit margin industry. The last remaining Hitachi Joei Tech Company plant, located in Gifu Prefecture, is scheduled to shut down TV production by October 2012, and is to shift focus to the component industry. The decision will not affect Hitachi TVs sold in other countries, all of which are currently manufactured outside of Japan.

As one of the major early adopters of flat panel display televisions (FPD TV), Japan thrived during the last decade in terms of TV shipments and growth. However, Japan's recent growth was fuelled by a government energy subsidy and is expected to begin a downward descent as shipments have fallen from 24.5m units in 2010 to around 21.0m units in 2011. With over half of Hitachi's TV business unit relying on the Japanese TV market, these changes are expected to have a negative effect on Hitachi's domestic sales. In terms of flat panel TV market share, Japan accounted for 23 per cent of total worldwide flat panel TV shipments during 2005. This fell to 12 per cent in 2010, and is expected to fall to just 5 per cent in 2015, with emerging APAC and Chinese markets expected to grow and gain dominance over the Japanese, North American, and Western European regions.

As FPTV consumption has spread to new regions, so too has its manufacturing. In 2004 when the FPD TV market was at 10.8m units, Japanese vendors took over 50 per cent market share, while Korean vendors held less than 15 per cent. In 2010 the market grew to 213.4m units with Japanese vendor market share falling to 31 per cent. Korean vendors took 32 per cent, and Chinese vendors comprised much of the remaining market. With the increase in competition, retail TV prices have been driven to lower-than-production-cost levels - in 2011 year-to-date, Sony's consumer products and services segment has lost approximately $371m, Panasonics Digital AVC Networks segment has lost $55m and Toshiba's Digital Products segment has lost $15m (TV revenues typically make up between 30 and 50 per cent of these business units). Moreover, exporting television sets has been made difficult for many Japanese brands with a strengthened yen hindering price-competition.

During Q1 2008 Hitachi had 7.3 per cent of the Japanese market, which has since fallen to 3.6 per cent in Q3 2011. While the closing plant had the capacity to manufacture 100 thousand LCD and plasma TVs every month, Hitachi has been so heavily reliant on the Japanese market, that as demand for TVs in Japan diminishes, it will obviously need to reposition in order to produce at sustainable levels. Hitachi's other two major markets, North America and Western Europe, have also reached a state of maturity. Hitachi may work to support its brand presence in other markets such as China and emerging APAC; two growing regions that are expected to collectively purchase 34 per cent of all TVs sold during 2012, but currently only make up less than 3 per cent of Hitachi's total TV shipments. Notably, Hitachi's presence has very recently grown at remarkable rates in Latin America; a strategy they can potentially replicate in other emerging regions.

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