Sony Corp. might sharply downsize its smartphone operations in China because business is unlikely to grow against competition from popular local rivals, company sources said Thursday.
Sony, which on Wednesday warned of a bigger loss than previously projected for fiscal 2014 ending March due to the flagging smartphone business, plans to eventually pull out of the market in the world’s second-largest economy as part of turnaround measures it aims to compile by around November, the sources said.
Sony is trying to install advanced audiovisual features in its smartphones but faces tough competition in China, where strong sales of the cheaper Xiaomi and Lenovo smartphones are also posing a challenge to giant Samsung Electronics Co. of South Korea.
Given the dominance of local manufacturers in China and their attempts to bolster development of high-spec smartphones, the Japanese giant has decided that it will be difficult to expand in China even if it invests aggressively there, the sources said.
Consultancy Canalys said the Chinese market accounted for 37 percent of global smartphone shipments, or 108.5 million units, from April to June. Sony was not in the top 10.
Sony intends to strengthen its smartphone business in Japan and the United States, but drastically review its strategy in Europe, where its sales are poor, the sources said.
On the Tokyo Stock Exchange on Thursday, the bigger loss estimate and its plan to skip dividends for the current business year, announced the previous day, hit Sony shares hard, driving them down ¥183.50, or 8.6 percent, to ¥1,940.00.
It will be the first time Sony has skipped a dividend payment since it listed on the Tokyo bourse in 1958.
In July, Sony cut its fiscal 2014 smartphone sales target to 43 million units from 50 million units.