Japanese electronics makers may be in for a rethink of the country’s manufacturing strategy as Toshiba Corp. is set to proceed with an overhaul of loss-making operations in the wake of an accounting scandal.

The restructuring plan unveiled in late December for the personal computer, television, and home appliance units has exposed the difficult task of returning to profitability for the 140-year-old industrial conglomerate that has become a household name.

Another electronics maker, Sharp Corp., is also struggling to get back on its feet as it continues to lose money in its liquid crystal display business, bringing into focus its strategy for survival heading into 2016.

These developments could become a turning point for an electronics industry that has been praised for manufacturing high-quality products but has faced stiff competition from foreign rivals when the domestic market is expected to shrink, analysts and experts said.

Toshiba is cutting around 7,800 jobs globally and selling some TV and washing machine production plants overseas. It now expects a record group net loss of ¥550 billion (around $4.6 billion) for the current business year through March due to restructuring costs.

“Toshiba’s survival is at stake now,” said Tsutomu Yamada, market analyst at kabu.com Securities Co. “The company aims to be leaner and focus on growth areas. We need to look at when it can return to profitability from a longer-term perspective,” he said.

Reducing dependence on consumer electronics is nothing new as Japanese electronics makers have been seeking their way out of unprofitability through a spate of restructuring steps in recent years.

But analysts say Toshiba should have done it sooner, and it was delayed by the overstating of profits totaling ¥224.8 billion on a pretax basis for nearly seven years through December 2014.

Toshiba’s rival Hitachi Ltd. is now a leaner company with its increased focus on social infrastructure businesses after pulling out of its flat TV production.

Sony Corp. has been putting more focus on growth areas — games and image sensors used in smartphones and other devices.

While Toshiba continues to reel from the accounting scandal, Sony has agreed to buy its image sensor production line. For the struggling PC business, Toshiba President Masashi Muromachi has indicated that integrating it with those of other companies such as Fujitsu Ltd. and Vaio Corp., a Sony spinoff, may be an option.

Demand for PCs is expected to remain sluggish as consumers are increasingly turning to smartphones and tablet devices. Analysts expect demand from corporate clients to be steady, but the scope for future growth to be limited.

In the April-September period of fiscal 2015, the number of PC shipments fell below the 5 million mark for the first time since fiscal 1999 to 4.74 million units, down 29.5 percent from a year earlier, data by MM Research Institute Ltd. show.

“Japanese PC makers need to change their way of thinking and doing business in the market,” said Masaki Nakamura, analyst at the research institute.

“There is still a question mark as to what kind of synergy Toshiba can create with other companies,” Nakamura said of a potential merger.

Despite the restructuring of the unprofitable units at Toshiba, its semiconductor business is a bright spot. Toshiba’s NAND flash memory produced at its Yokkaichi plant in Mie Prefecture has a competitive edge.

It still requires constant and heavy investment to maintain its competitiveness, a point closely watched by analysts, because it appears difficult for Toshiba to secure funds by selling shares and corporate bonds following the accounting scandal.

The dominance once enjoyed by Japanese semiconductor makers has been on the decline for years amid fierce price competition from U.S. and South Korean rivals. Major chip maker Renesas Electronics Corp., which was established in 2010, has undergone restructuring to become profitable.

“It can be said of other sectors, but the semiconductor industry is typical of Japan’s manufacturing that makes high-quality products tailored to each customer,” said Yaichi Aoshima, professor at the Institute of Innovation Research at Hitotsubashi University.

“It’s not cost efficient if you push it too much because often Japanese companies tend to have a large lineup of high-spec products but they lack versatility,” Aoshima added.

For the future of the Japanese electronics industry, Toshiba and Sharp will likely stay in the spotlight, with Taiwan’s Hon Hai Precision Industry Co. seen as willing to invest in Sharp.

Toshiba President Muromachi has said he aims to achieve a “V-shaped recovery” from fiscal 2016 onward.

“When it comes to reorganization, it’s been like a test flight for the electronics industry,” said an analyst at a major Japanese brokerage. “But now the industry could gravitate toward realignment after the Toshiba scandal.”

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