January 8, 2010 / 12:35 PM / 11 years ago

Toshiba to outsource bulk of TVs in U.S.

LAS VEGAS (Reuters) - Japan’s Toshiba Corp (6502.T) needs to outsource more TV production in the U.S. to better compete against bigger South Korean rivals and focus on high-end products, an executive said.

A visitor looks at Toshiba Corp's liquid crystal display (LCD) televisions at an electric home appliances shop in Tokyo December 21, 2007. REUTERS/Toru Hanai

Toshiba, which is trying to regain market share from sector leaders Samsung Electronics (005930.KS) and LG Electronics (066570.KS), could outsource 80 percent of its U.S. product line-up as price slides hit newer flat TVs, said Masaaki Osumi, head of the firm’s digital media network business.

That compares with Toshiba’s previous guidance of a 50-50 mix of premium TVs that it would make using its own resources and low-end TVs it would outsource to original design manufacturers.

“We need to cut fixed costs in sales and manufacturing. That is the only way to survive in the world’s most demanding TV market,” Osumi told Reuters in an interview on the sidelines of the Consumer Electronics Show (CES) late on Thursday.

Toshiba, North America’s No.5 vendor of flat TVs, may trim idle TV production facilities, such as at its Tennessee plant, he said.

Toshiba is focusing on its high-end televisions called Cell Regza TVs, powered by a chip also used in Sony Corp’s (6758.T) PlayStation 3 console and boasting high video processing. The Cell TV could go on sale in the U.S. by the autumn with real-time 2D to 3D conversion of content, other executives said.

The firm makes PCs, nuclear reactors and is the world’s No.2 maker of NAND flash memory (which is used increasingly in portable devices such as Apple’s iPhone and in e-readers and digital cameras).

And it hopes that the power-packed TVs will help raise brand recognition in a market where product differentiation becomes increasingly difficult.

“Now, everyone makes LED (light-emitting diode) backlit TVs, and there is no extraordinary premium there,” he said. “With the exception of the LEDs used in the Cell, it is hard to tell the difference between Toshiba’s LEDs and Sharp Corp’s (6753.T), or anyone else’s.”

TV revenues in October-December rose by at least a double digit percentage from the previous year, as a sales boost in Japan from a government-backed discount programme for energy-efficient appliances and firm sales in Germany outweighed a drop in the U.S.

Toshiba should be able to grab double-digit sales growth in 2010 as price falls slow to about 10 percent this year, compared with a 20 percent to 25 percent fall in the previous year, he said.

“We need a leaner cost structure so that we can go after 10 percent of the market worldwide,” Osumi said.

“We cannot let our TV business go into the red. If we go into the red, there’s an immediate internal call that we withdraw from TVs,” he joked.

Shares in Toshiba earlier closed up 3.5 percent at 538 yen, outperforming Tokyo’s electrical machinery index .IELEC.T, which rose 1.6 percent.

The CES, the world’s largest consumer technology tradeshow, runs until January 10.

Reporting by Mayumi Negishi; Editing by Chris Gallagher and Sharon Lindores

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