Closing a Separate Audio & TV Factory in Brazil as Well
Sony Corporation has two large factories in Malaysia – one manufacturing audio products, and the other manufacturing predominantly video products. A new report out of Japan indicates that the company plans to close its audio factory in Malaysia by no later than the beginning of 2022 – or in other words, during the upcoming year of 2021. This move is likely a result of a previously announced strategic refocusing on businesses other than a/v electronics at the major consumer electronics manufacturer.
See more on this expected/shocking move by Sony…
Strata-gee reported in September that Sony executives have openly discussed plans to refocus their business portfolio. In a way, this news seems like the natural progression of the market trends the brand is experiencing, with categories like video games and networking – which are soaring – gaining the favor of upper management, while their more hardware-centric electronics solutions, such as a/v is decidedly tapering off.
But in another way, this is a shocking development as consumer electronics products are what built the Sony brand into the global empire that it now represents. In our post, we noted that Sony Electronics, formerly the star business division of the entire company, would be taking a backseat to other divisions. So much so, that the company plans to change the division’s name from the more descriptive Sony Electronics…to simply Sony Corp. (Current parent company Sony Corp., will change its name to Sony Group.)
So Begins a Recently Announced Restructuring
Most likely, this announcement of the closing of the Sony audio factory in Malaysia is a step forward towards this business reorganization. The report from the Nikkei says that the company will shutter the audio factory in Penang and consolidate its manufacturing functions into the TV factory in Kuala Lumpur…Malaysia’s capitol.
Approximately 3,600 workers will be impacted by this consolidation. While the company says it will try to move some of them to other facilities, most of them will likely be terminated.
Sobering News for Those Selling Sony A/V
This is sobering news for those who have come to rely on Sony as a key supplier for their audio/video electronics needs. Sony’s Penang plant was their primary factory producing headphones and home audio equipment. This plant will cease all operations by the end of September 2021, and the facility will be fully closed by no later than the end of March 2022…the close of their fiscal year.
The factory at Kuala Lumpur was the company’s main factory producing their popular line of televisions. Both of these plants were launched thirty-two years ago in 1988. It is unclear just what the production mix between audio and video will be moving forward in the Kuala Lumpur plant, as the company has not yet released those details.
Also Closing Only Factory in Brazil; Also Producing A/V
The Nikkei also reports that Sony will shutter yet another factory – this one in Brazil – that also produces television and audio products. That facility is even older than the Malaysia factories (it was launched in 1984) and is the only manufacturing plant that the company has in Brazil.
Clearly, we are looking at a serious cutback in production of both audio and television products from Sony over the next 12-18 months. Sony says that its electronics business has suffered “due to the impact of the coronavirus pandemic,” local reports noted. Largely for this reason, Sony is forecasting a 23% drop in operating profits for the fiscal year ending in March 2021.
See more on Sony by visiting: sony.com.
Of course, Sony will still have access to a wide, broad set of CMs and assemblers across Asia and the world, so I would not view this as a capacity limit. Rather this is a refocus on producing assets, meaning they think their bread is buttered better elsewhere than these factories. As we have seen, getting out of building televisions in general has not stopped Sony from producing some very fine products. Placing the risk on others for running and maintaining a factory is done by many, including some like Apple or Qualcomm to name a few.
Hi Robert,
Thanks for your thoughts on this. It sounds as though you are suggesting that Sony is simply cutting back on company-owned factories, and shifting their production to outside contract manufacturers (CMs). That is certainly something that CAN be done, but only if your assumption is that Sony will seek to maintain existing levels of production of A/V products…just more from CMs.
However, as I pointed out in my September post, Long the Star of the Company, Sony Elects Shifts to a Supporting Role, Sony upper management in Japan has strongly signaled a shift away from electronics, such as A/V. The company has seen great growth in their other businesses, such as ICs and sensors, financial services, videogames and even smartphones. The company is also at work, as identified in my post, at creating new and profitable services which are easily and affordably created. Sony managers told the Nikkei that, “We’ve been disproportionally spending our development resources on electronics technology,” suggesting the outsized R&D costs for electronics no longer makes sense given current market trends.
So it looks pretty straight-forward that this action in closing down multiple audio and A/V factories is not simply a shift to contract manufacturing, but rather cutting back the category itself.
Unless, that is, you have some inside information to which I am not privy.
Ted
Seems like I’ve read this story a couple of times in the past 20 years or so. In a few years we’ll be reading about how they are re-entering the market with a new focus, blah, blah…. Sorry for being so syndical.
This is certainly interesting and not unexpected. Clearly Sony is, as you say, moving away from audio. This is really a shame as in many ways Sony has been instrumental in creating and shaping the audio industry and market as we know it, or perhaps I should say as we knew it. With Sony’s de-emphasis and Onkyo/Pioneer teetering on the edge, or perhaps already over the edge, this seems to leave only Yamaha in competition with Sound United for the bread and butter receiver business. However, I suppose that the issue is that the receiver business is no longer bread and butter. It is certainly a shame, but that is reality. While it may change in the future, as Randy suggests, somehow I don’t think so. It appears, as predicted and observed, that the audio business of the future will be a high end enthusiast/hobbyist business as it was before the great boom in the late 60s, and very simple lifestyle products delivering music (and more recorded music than ever) to most.
Sobering indeed… that FY1997/FY2020 chart says it all – wow! Sounds like Robert is indicating that CM deleverages them but the products keep flowing. You don’t seem so sure, Ted… If Ted’s view becomes the reality, does this allow a door to creak open for Onkyo/Integra to crawl back in? Interested in hearing your view on that.
This is indeed sad news. But only signals at incompetency of present executives to continue innovation and thought leadership in audio business. All last decade I am witnessing the decline in SONY Audio products, they have been producing really bad and low quality units. So no blame on competition as they struggled to produce high quality competitive products. Shame and sad news. Audio is the root and core product and must have stayed in. In the UK/Europe there are no speakers, no receivers, no headphones, no earphones, only few cheap nasties, so they can only blame themselves. When corporation grows to much, management and corporate polititans dominate the decisions, not product designers.