PREVIEW-Japan electronics giants face yen, Europe challenge

(For related table click [ID:TOE66K05O])

* What: Qtrly results from Japan electronics makers in July

* When: Canon July 27; Sony, Sharp, Panasonic, Nintendo on 29

* Second-half demand uncertain, 3D reaction eyed

By Isabel Reynolds

TOKYO, July 26 (Reuters) - Most of Japan's big electronics firms are likely to report a strong quarter on robust consumer demand, though the yen's gains and a slowdown in key European export markets may weigh on quarters ahead.

Canon Inc (7751.T) is seen doubling quarterly profits on healthy sales of high-end cameras [ID:nTOE66J04U], while cost-cutting and firm demand for consumer products are expected to help Panasonic Corp (6752.T) and Sharp Corp (6753.T) reverse the losses they suffered in the April-June period last year.

Consensus estimate has Sony Corp (6758.T) staying in the red for the quarter, but a report in the Nikkei business daily on Monday said it would turn a 10-30 billion yen ($114-$343 million) profit thanks to robust sales of items such as cameras and personal computers.

"If they could achieve this figure, it would be extremely impressive," said Nobuo Kurahashi, an analyst at Mizuho Investors Securities Co Ltd. "But it would not remove concerns about the future. We are all eager to hear about how exchange rates will affect their plans for the rest of the year."

Nintendo Co Ltd (7974.OS), maker of the Wii and DS consoles, is expected to show a flat profit ahead of the launch of its much anticipated 3D game console, unveiled at the E3 gameshow last month and expected on the market by March 2011. [ID:nN1547425]

Consumer response to 3D technology will be an increasingly important issue this year, as game and TV makers bank on the new technology to boost sales that might otherwise slip on economic uncertainty.

Nintendo is also facing increasing competition from games played on smartphones like Apple Inc's (AAPL.O) iPhone, rather than dedicated consoles.

YEN IS TOP CONCERN

But exchange rates are at the top of investors' list of immediate concerns.

The euro slumped from about 128 yen to 110 yen during the past quarter, while the dollar slid from over 94 yen to about 88, making it harder for Japanese exporters, most of whom had forecast the euro at about 125 yen, to turn a profit.

Though relief after European bank stress tests and economic data last week contributed to a rise in Asian shares on Monday, analysts remain cautious about the second half of the year.

"Demand could be peaking out," said Yoshihisa Okamoto, fund manager at Mizuho Asset Management. "There is some concern about that."

Concerns about the yen's surge apply especially to Canon, which made 60 percent of its sales in Europe and the United States last year, and to Sony, which relies on the two regions for almost half of its turnover.

Canon closes its books at the end of December, while most Japanese companies end their business year on March 31.

Sony, the world's third-largest maker of flat-screen TVs after Samsung (005930.KS) and LG Electronics (066570.KS), is hoping to pull its loss-making television business into profit this year, after announcing earlier this year it had turned its Playstation game consoles profitable.

But analysts say TVs could linger in the red this quarter, as Sony pursues an ambitious sales target of 25 million units for the year, heating up price competition with rivals like Panasonic, who are also seeking to expand sales.

In an effort to capitalise on soccer World Cup fever, Sony put out a 3D TV in June, playing catch-up with rivals including Samsung, Sharp and Panasonic.

Sony hopes such models will make up 10 percent of its TV sales this year and enable synergies with its treasure trove of movie and game content, but analysts say consumers may be hard to persuade.

There are other sources of uncertainty ahead.

Last week South Korea's LG Display (034220.KS), the world's second-largest maker of liquid crystal displays (LCDs), said it was considering cutting production due to weak demand from TV makers.

Weaker demand would also affect Sharp, the world's fifth-largest maker of LCD panels, though analysts say its sales of end products such as mobile phones and televisions are thought to have been strong in the April-June quarter. ($1=87.44 Yen) (Editing by Muralikumar Anantharaman)