Sony denies China withdrawal report

Article claimed electronics giant will pull out

The Chinese branch of Japanese consumer electronics giant Sony Corp said Wednesday that it is "shocked" and "confused" as it denied a media report claiming that the company is planning to pull out of the Chinese market.

China, along with the US and the Japan, are considered by Sony to be its three foremost markets as the company continues to strengthen its units across a range of sectors including R&D, marketing and sales, the company said in a statement e-mailed to the Global Times on Wednesday.

A weekly edition of Beijing-based Legal Daily newspaper reported on Wednesday that Sony is mulling a withdrawal from China, citing a company employee using the pseudonym Xiaomei at the Sony headquarters in China.

The report soon became viral on Chinese news websites. However, it did not elaborate on whether Sony will fully withdraw or only exit certain sectors in the country.

The report went on to say that the withdrawal is an open secret among Sony's Chinese employees, who face the prospect of either leaving the company or accepting work at overseas locations.

Sony stated in the statement that it had achieved what it called good sales performance in China during the seven-day National Day holidays, which started from October 1.

Sony earned sales and operating revenue of $1.32 billion in China, up 8 percent year-on-year, in the company's first quarter 2014 financial report for the period that ended on June 30, 2014. The report indicated that China accounts for about 7.3 percent of the company's global sales.

Globally, Sony is cutting its payroll, selling a number of its business and assets, and already got de-listed from the London stock market in August.

Lu Renbo, director of the Consumer Electronic Product Survey Office at the China Electronic Chamber of Commerce, said there is no denying that Sony is moving to a weakened global presence but a full-scale -China withdrawal is unlikely in the short term.

"China is a major market for Sony, it had good sales in both consumer electronic products like cameras and engineering products such as video editing machines and high-definition equipment used by the TV industry," Lu told the Global Times Wednesday.

Lu said Sony will probably trim and outsource some of its business, like those in the manufacturing and service links of the supply chain, but Sony products and its brand will definitely stay in China.

However, there are analysts who believed the refuted report still carries some truth.

Liang Zhenpeng, a Beijing-based independent home appliance industry analyst, said Sony's consumer electronic business could be facing a substantial downsizing in the near term in China.

"The consumer electronics business once lay at the heart of Sony's business but it is losing money these days. Yet Sony is losing its R&D and innovation prowess and finds it increasingly harder to underpin its high-priced products," -Liang said.

"As the TV industry makes a major shift from pure hardware to a combination of hardware and software, as seen in the emergence of smart TVs, Sony missed getting on board and faced intense competition from China's homegrown TV brands such as Xiaomi and LeTV," Liang told the Global Times Wednesday.

The same story could be said about Sony's smartphone models in China, which failed to have an impact in the Chinese market, Liang noted.

Sony reportedly said in July that it was hoping it could turn a profit on its TV business after 10 years of losses via restructuring.

The fact that Sony is working on spinning off its TV division into a separate company could be seen as a sign that Sony is readying itself to sell its TV business, Liang said.

In China's highly competitive phone market, especially its smartphone sector, a number of Japanese companies have already given up. Sharp left the sector in 2013, while Panasonic and NEC left the phone market in 2006, and Toshiba in 2005, according to media reports.

"Sony is the only Japanese company willing to fight in the smartphone business but I expect it will likely pull out of China within the next two years," Liang said.