In its financial reports for the fourth quarter of 2011, Japanese company Toshiba posted a loss of ¥10.6bn ($138.7m; €105.2m) amongst total revenues of ¥1.4tn ($18.3bn; €13.8bn). The quarterly loss, which followed from a previous profit of ¥22.2bn ($290.6m; €220.3m) was primarily attributed to Toshiba's Digital products business unit, which itself accrued operating losses of ¥15.4bn ($185.5m; €140.7m) over the period. The Digital Products business unit consists of sales from both PCs and TVs, following the reclassification of hard-drive discs (HDD) and optical drive discs (ODD) to the Electronic Devices business unit in Q3 2011.
Toshiba's PC segment has remained profitable over a sustained period of time, and in 2011 accounted for a total operating profit of $175.6m (albeit with a yearly operating margin of 1.8 per cent), with every individual quarter profitable for this segment. However, this has been counterbalanced by the TV division, which IHS Screen Digest estimates to have accumulated operating losses of approximately $273m over the calendar year, at an operating margin of -2.4 per cent. Following on from impressive operating profits for its TV segment in 2009 and 2010 (relative to the industry), the loss in profits in 2011 has been attributed to declining demand in Toshiba's domestic market of Japan.
These factors have undoubtedly affected Toshiba, for whom a major proportion of TV shipments (41.3 per cent in 2010) occur in Japan. Comparing the $3.6bn of TV revenues accrued in the fourth quarter of 2010 to the $2.6bn in 2011, there has clearly been a notable shift, which is certainly attributed to the sharp decline in demand from Japan. However, the wider issue here is declining profit margins in the TV business as a whole which stands apart from and compounds Toshiba's troubles in its domestic market of Japan. IHS Screen Digest estimates that TV revenues for Toshiba in 2011 were approximately equivalent to those in 2010, at $11.5bn. It is not that the global market for TVs is declining in volume - global TV shipments in 2015 are expected to rise to 281m, from 251m in 2010 - but that prices have been driven down, through heavy competition, to the extent that the profit margin on an individual set is almost negligible.
Toshiba are not unique in this position - other Japanese TV manufacturers, such as Sony and Panasonic, have also experienced sliding operating margins in 2011. Western European and Japanese manufacturers have been struggling to compete at the high-volume end of the market for a few years now (emphasised when Philips ceased internal production of TVs in early 2011), as South Korean and Chinese manufacturers have ramped up production and offered competitive price points. When flat-panel displays proliferated post 2005, TV manufacturers focused on volume, but amidst falling profit margins, this focus has now switched to technological enhancements to the TV, such as 3D, internet connectivity and Full HD.