The news that Sony is laying off 20,000 workers and redirecting its effort both to increase revenues in China and lower costs to compete with Chinese consumer electronics has only one message for U.S. technology and consumer electronics companies: China is the main competitor and main market where they must succeed in the next 20 years. Ignoring the China market will lead to corporate fatality.
Sony's president, Nobuyuki Idei says he wants to gain five percent of the Chinese consumer electronics market for Sony, which currently holds about a one percent market share. Those gains have to come while domestic Chinese companies and competitors from other countries, particularly Samsung and LG in Korea, compete for a share of the exploding Chinese market. So, Sony doesn't just have to increase its Chinese sales by 500%, it has to increase it by 5,000% over the next decade to achieve that market share target.
The layoffs, while not unprecedented in Japan, are massive. And the suggestion that the company will compete in China by outsourcing manufacturing to China is a clear sign of what happened to that headcount, half of which were "administrative" positions overseeing an already deeply automated production system. Sony will never be rehiring that 13 percent of its workforce --those jobs have gone permanently to the floating market for outsourced manufacturing and middle management associated with those product lines has been wiped out.
Posted by Mitch Ratcliffe at October 28, 2003 05:03 PM | TrackBack