rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Indian demand provides spark for Japanese electronics cos

Indian demand provides spark for Japanese electronics cos

June 21, 2013 15:09 IST

A Sharp televisionIt’s the anti-Chinese sentiment that is driving Japanese investments towards India. Years after focusing on China, Japanese companies are now taking a more regionally balanced approach, said a consultant.

It is not without reason that Japanese consumer electronics companies such as Sony, Panasonic, Hitachi, Daikin and Sharp are investing significant sums in India.

For these brands, consumer demand in India continues to be high; in developed markets, their business is slowing.

Panasonic, for instance, has recently announced plans to set up a second manufacturing facility in India for business-to-business products such as energy and high-definition video conferencing solutions.

It has also lined up an investment of about $250 million towards marketing and advertising by March 2015. This follows the completion of its first manufacturing unit in Haryana, at an estimated investment of Rs 1,000 crore (Rs 10 billion).

The company is also scouting for strategic partners for non-consumer electronic products such as energy solutions, security and surveillance systems, information technology and telecom products.

For the year ended March, Panasonic’s global business recorded a net loss of $7.5 billion.

After the announcement of the results, the company said it would return to profit in 2013-14 by trimming unprofitable businesses and focusing on emerging markets such as India, where the appetite for its products was growing.

“India, without question, is a key market for us,” Panasonic President Kazuhiro Tsuha had said during his visit to India in April.

Panasonic isn’t alone. Hitachi has lined up investments of about Rs 4,000 crore (Rs 40 billion) by March 2016 to establish a manufacturing plant in India, hoping to exceed Rs 20,000 crore (Rs 200 billion) in revenues by 2015-16, an announcement made by Hitachi President Hiroaki Nakanishi at the company’s recent board meeting in India.

In the past few years, even as Japanese consumer electronics firms focused on China, Korean majors Samsung and LG swept the Indian market with aggressive pricing, local production and huge product offerings.

During this period, Japanese companies didn’t revise prices and took time to bring new products here.

As a result, they lost their dominance to Korean companies.

“It’s the anti-Chinese sentiment that is driving Japanese investments towards India. Years after focusing on China, Japanese companies are now taking a more regionally balanced approach,” said a consultant with a global advisory firm.

Through the past year, most Japanese consumer electronics makers have reduced prices by 10-20 per cent in India to counter aggressive pricing by their Korean rivals, Samsung and LG.

Akai, which tried entering the Indian market a third time in 2010, is playing on pricing to gain a foothold.

“The brand has a good recall among mass Indian consumers.

“We would certainly capitalise on that. But we would also offer premium products at a much cheaper price,” Managing Director Pranay Dhabai said in a recent interview with Business Standard.

Though its products would be 8-10 per cent cheaper, the company claims quality would be on a par with that offered by competitors.

The company doesn’t plan to set up a manufacturing facility in India in the near future.

“India, a high-growth market, is, and will continue to be one of the key markets for Sony. In FY12, Sony made a marketing investment of Rs 550 crore (Rs 5.5 billion) towards ATL (above the line) and BTL (below the line) activities.

“We plan to make significant investment in the coming years as well,” said Sunil Nayyar, head (sales), Sony India.

Company executives said the Sony India unit had already jumped to the fourth position in 2012-13, behind its units in the US, China and Japan, owing to double-digit growth in categories such as laptops and flat-panel TVs.

In 2012-13, Sony India’s sales rose 30 per cent to Rs 8,206 crore (Rs 82.06 billion).

Nayyar said the company recorded revenue of Rs 6,000 crore (Rs 60 billion) in 2012-13.

“We are on track to trebling our revenue to Rs 20,000 crore (Rs 200 billion) by 2015,” he added.

While Sony is yet to decide on setting up a plant in India, Sharp has announced plans to invest about Rs 700 crore (Rs 7 billion) to manufacture air-conditioners, refrigerators and microwave ovens in the country.

AC maker Daikin is recording yearly growth of about 20 per cent, ahead of the market average.

“We will double our manufacturing capacity to a million units a year at our existing factory at Neemrana in Rajasthan, through the next couple of years,” said Kanwal Jeet Jawa, managing director, Daikin Airconditioning India.

The company has already invested Rs 250 crore (Rs 2.5 billion) in the facility.

“We will focus on making India a manufacturing hub. We plan to export products from India to other markets, starting with West Asia and the African region. . . The government is proactive in developing a framework to bring major transformation in the ecosystem to promote local manufacturing,” Panasonic said in an e-mailed reply to a query.

Both Sony and Panasonic are increasing distribution and retail presence across India, focusing on regions beyond the metros, though tie-ups with organised retail chains and local standalone shops.

“The growing, young consumer base in India, a potentially huge growth economy, and the government of India’s strong efforts to woo Japanese investment are key reasons behind the manifold increase in interest shown by Japanese companies in India.

“Recent investment announcements by companies such as Panasonic, Honda and Sharp are an indication of the fact that the Indian market is set to drive their growth,” said Mritunjay Kapur, country managing director, Protiviti Consulting.

Experts say currently, India’s contribution to the revenues of Sony and Panasonic is three to five per cent; the companies plan to raise this to at least 10 per cent in the next few years, as developed markets such as North America, Europe and Japan slow.

At present, Sony is among the top three companies in digital cameras, flat-panel TVs and laptops in India. Panasonic is ranked third in the split-AC segment, after Voltas and LG; in the flat-panel TV category, it is fourth, after Samsung, Sony and LG.

BETTER LATE THAN NEVER

To gain lost ground from Korean majors Samsung and LG that swept the Indian market with aggressive pricing, local production and huge product offerings, Japanese companies have reduced prices by 10-20 per cent

  • PANASONIC has announced plans to set up a second manufacturing facility in India for business-to-business products such as high-definition video conferencing solutions.
    It has also lined up an investment of about $250 million towards marketing and advertising by March 2015. It has completed its first manufacturing unit in Haryana, at an estimated investment of Rs 1,000 crore (Rs 10 billion).
    The company is also scouting for partners for non-consumer electronic products such as security and surveillance systems

  • HITACHI has lined up investments of about Rs 4,000 crore (Rs 40 billion) by March 2016 to establish a manufacturing plant in India

  • SHARP has announced plans to invest about Rs 700 crore (Rs 7 billion) to manufacture ACs, refrigerators and microwave ovens in the country

  • DAIKIN has said it would double its manufacturing capacity to a million units a year at its Neemrana factory in Rajasthan.
    The company has already invested Rs 250 crore (Rs 2.5 billion) in the production facility
Sounak Mitra in New Delhi
Source: