Identifier
Created
Classification
Origin
09TOKYO309
2009-02-09 09:38:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tokyo
Cable title:
SONY EXECUTIVE ON CHALLENGES TO JAPAN'S
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UNCLAS SECTION 01 OF 02 TOKYO 000309
SENSITIVE
SIPDIS
STATE FOR EAP/J, EEB
STATE PASS USTR FOR MBEEMAN
DOC FOR KROTH, DLEE
E.O. 12958: N/A
TAGS: EIND EINV ETRD PGOV JA
SUBJECT: SONY EXECUTIVE ON CHALLENGES TO JAPAN'S
ELECTRONICS INDUSTRY
REF: TOKYO 232
TOKYO 00000309 001.2 OF 002
Sensitive But Unclassified. Contains Proprietary Information.
-------
Summary
-------
UNCLAS SECTION 01 OF 02 TOKYO 000309
SENSITIVE
SIPDIS
STATE FOR EAP/J, EEB
STATE PASS USTR FOR MBEEMAN
DOC FOR KROTH, DLEE
E.O. 12958: N/A
TAGS: EIND EINV ETRD PGOV JA
SUBJECT: SONY EXECUTIVE ON CHALLENGES TO JAPAN'S
ELECTRONICS INDUSTRY
REF: TOKYO 232
TOKYO 00000309 001.2 OF 002
Sensitive But Unclassified. Contains Proprietary Information.
--------------
Summary
--------------
1. (SBU) Sony reports serious concern within Japan's
electronics industry about actions various governments have
taken recently that restrict or could restrict trade. He
included in his assessment adoption of the "10 2" rule in
the U.S. and reports of possible "Buy American" amendments to
the Stimulus Package. He rejected critical comparisons of
Sony and Nintendo appearing in the business press saying
performance has varied between the two companies because each
follows a very different business model. Sony will cut
production and jobs in Japan as part of an urgent effort by
firms in the sector to lower production costs. Actions by
governments that increase the time it takes to get products
to market have also been harming Japanese electronics
manufacturers. End Summary.
2. (U) EMIN met February 3 with James Toyama, Sony Deputy
General Manager for International Public Affairs and Trade
Policy Committee Chair for JEITA, the Japan Electronics and
IT Industry Association. The conversation covered the
economy and electronics markets, measures Sony is taking to
address dramatic changes in its operating environment, and
Sony's primary policy concerns.
--------------
Concerns about Protectionism
--------------
3. (SBU) Concern over actual and possible protectionist
measures stood at the top of Toyama's agenda. He cited
worrying moves in India, Russia, China, Europe, and
elsewhere, noting the negative precedent should larger
developed countries like the U.S. adopt measures others could
see as protectionist. He then raised the U.S. "10 2" rule
and said adoption of the "Buy America" provisions reported in
the press could have ongoing negative consequences.
4. (SBU) Toyama listed other concerns as well, including
India raising select applied tariff rates, Russia's disputes
with Ukraine and Georgia, China's consideration of new
encryption standards, and the EU's customs reclassification
of products covered by the WTO Information Technology
Agreement. From business' perspective, such moves could
easily trigger many more protectionist actions, Toyama said.
--------------
More Difficult Times
--------------
5. (SBU) Taking a look at Japan's electronics sector in
general, Toyama said it is important to differentiate how
different companies have been affected by the global
downturn. He rejected criticism in a January 28 Wall Street
Journal article that Sony operates too many product lines and
lags behind competitors. Nintendo, the only major Japanese
electronics manufacturer to report a profit in the
October-December quarter, licenses production to others,
Toyama said, and this model for mitigating some risk seems to
serve the company well in the current market. In contrast,
Sony has a more diversified model with a broader range of
products in which it manages factors such as research and
development and domestic/foreign production differently
across distinct product lines. Despite the current
headlines, Sony feels this model is effective in the
longer-term. Toyama explained Sony carefully manages its
production allocation to consider factors besides labor and
logistics costs as products move through their lifecycle,
TOKYO 00000309 002.2 OF 002
e.g., the need for engineering support and protection of
sensitive IPR.
6. (SBU) In talking about production and cutting costs,
Toyama said Sony and the Japanese electronics industry as a
whole must lower their respective break-even points. Sony
recently announced plans to cut another 8,000 out of 160,000
jobs world-wide by March. This announcement comes on top of
the nearly 10,000 already cut during the 2005-07 period.
Sony will reduce investment in its electronics business by
roughly 30 percent by March 2010, as well as discontinue or
delay projects in areas such as semiconductors and LCD
televisions. The company recently announced it will cut its
total number of manufacturing sites by 10 percent, from 57
currently, by March 2010 and will cease production at the
Sony Dax Technology Center in France.
--------------
The Importance of Trade Facilitation
--------------
7. (SBU) Toyama also raised concerns with measures that
complicate product development and distribution in the IT
sector. Changes in government regulation and slower
logistics negatively affect the sector's
production-distribution cycle and the current economic
environment has magnified risk to the industry from holding
inventory or taking longer to get products to market. He
cited as risks the lack of commercial credit, exchange rate
movements, and changes in consumer demand. While Toyama does
not see the bankruptcy of retailer Circuit City by itself
affecting Sony sales significantly, the possibility of
additional retailers going out of business adds another risk
factor. He complained that governments had worked hard
during the 1990s to help reduce times to market, and now
these gains are under threat.
ZUMWALT
SENSITIVE
SIPDIS
STATE FOR EAP/J, EEB
STATE PASS USTR FOR MBEEMAN
DOC FOR KROTH, DLEE
E.O. 12958: N/A
TAGS: EIND EINV ETRD PGOV JA
SUBJECT: SONY EXECUTIVE ON CHALLENGES TO JAPAN'S
ELECTRONICS INDUSTRY
REF: TOKYO 232
TOKYO 00000309 001.2 OF 002
Sensitive But Unclassified. Contains Proprietary Information.
--------------
Summary
--------------
1. (SBU) Sony reports serious concern within Japan's
electronics industry about actions various governments have
taken recently that restrict or could restrict trade. He
included in his assessment adoption of the "10 2" rule in
the U.S. and reports of possible "Buy American" amendments to
the Stimulus Package. He rejected critical comparisons of
Sony and Nintendo appearing in the business press saying
performance has varied between the two companies because each
follows a very different business model. Sony will cut
production and jobs in Japan as part of an urgent effort by
firms in the sector to lower production costs. Actions by
governments that increase the time it takes to get products
to market have also been harming Japanese electronics
manufacturers. End Summary.
2. (U) EMIN met February 3 with James Toyama, Sony Deputy
General Manager for International Public Affairs and Trade
Policy Committee Chair for JEITA, the Japan Electronics and
IT Industry Association. The conversation covered the
economy and electronics markets, measures Sony is taking to
address dramatic changes in its operating environment, and
Sony's primary policy concerns.
--------------
Concerns about Protectionism
--------------
3. (SBU) Concern over actual and possible protectionist
measures stood at the top of Toyama's agenda. He cited
worrying moves in India, Russia, China, Europe, and
elsewhere, noting the negative precedent should larger
developed countries like the U.S. adopt measures others could
see as protectionist. He then raised the U.S. "10 2" rule
and said adoption of the "Buy America" provisions reported in
the press could have ongoing negative consequences.
4. (SBU) Toyama listed other concerns as well, including
India raising select applied tariff rates, Russia's disputes
with Ukraine and Georgia, China's consideration of new
encryption standards, and the EU's customs reclassification
of products covered by the WTO Information Technology
Agreement. From business' perspective, such moves could
easily trigger many more protectionist actions, Toyama said.
--------------
More Difficult Times
--------------
5. (SBU) Taking a look at Japan's electronics sector in
general, Toyama said it is important to differentiate how
different companies have been affected by the global
downturn. He rejected criticism in a January 28 Wall Street
Journal article that Sony operates too many product lines and
lags behind competitors. Nintendo, the only major Japanese
electronics manufacturer to report a profit in the
October-December quarter, licenses production to others,
Toyama said, and this model for mitigating some risk seems to
serve the company well in the current market. In contrast,
Sony has a more diversified model with a broader range of
products in which it manages factors such as research and
development and domestic/foreign production differently
across distinct product lines. Despite the current
headlines, Sony feels this model is effective in the
longer-term. Toyama explained Sony carefully manages its
production allocation to consider factors besides labor and
logistics costs as products move through their lifecycle,
TOKYO 00000309 002.2 OF 002
e.g., the need for engineering support and protection of
sensitive IPR.
6. (SBU) In talking about production and cutting costs,
Toyama said Sony and the Japanese electronics industry as a
whole must lower their respective break-even points. Sony
recently announced plans to cut another 8,000 out of 160,000
jobs world-wide by March. This announcement comes on top of
the nearly 10,000 already cut during the 2005-07 period.
Sony will reduce investment in its electronics business by
roughly 30 percent by March 2010, as well as discontinue or
delay projects in areas such as semiconductors and LCD
televisions. The company recently announced it will cut its
total number of manufacturing sites by 10 percent, from 57
currently, by March 2010 and will cease production at the
Sony Dax Technology Center in France.
--------------
The Importance of Trade Facilitation
--------------
7. (SBU) Toyama also raised concerns with measures that
complicate product development and distribution in the IT
sector. Changes in government regulation and slower
logistics negatively affect the sector's
production-distribution cycle and the current economic
environment has magnified risk to the industry from holding
inventory or taking longer to get products to market. He
cited as risks the lack of commercial credit, exchange rate
movements, and changes in consumer demand. While Toyama does
not see the bankruptcy of retailer Circuit City by itself
affecting Sony sales significantly, the possibility of
additional retailers going out of business adds another risk
factor. He complained that governments had worked hard
during the 1990s to help reduce times to market, and now
these gains are under threat.
ZUMWALT