The Japanese electronics industry, in which palladium plays a crucial role, is embarking on a major reorganising strategy in order to adjust to weakening global economic conditions, EETimes Asia reports.

According to the newspaper, electronics giants are being compromised by a number of factors - not least the emergence of China as a cheap manufacturing hub - and will need to reassess their goals.

Analysts have suggested that major high-tech firms such as Fujitsu, Hitachi, NEC, Mitsubishi and Toshiba are looking to move away from low profitability semiconductor and telecommunications businesses.

A February report by Standard and Poor's claimed: "The financial strength of Japan's top five electronics conglomerates is weaker than those of their overseas peers.

"While the cash flow coverage ratios of Japan's five electronics conglomerates remain in the 30 to 40 per cent range, those of overseas peers exceed 100 per cent with the exceptions of Siemens (about 40 per cent.)

"In a difficult business environment, high financial flexibility is a more important factor to maintain and improve competitiveness."

The reorganisation commenced around five years ago and is set to pick up pace in the coming years as a result of additional pressure from shareholders, according to the news provider.

A number of companies are choosing to form strategic alliances with local firms, such as in 1999, when NEC and Hitachi joined forces to create Elpida Memory, which then absorbed Mitsubishi's DRAM business in 2003.

These changes - such as Panasonic's announcement in December that it will purchase Sanyo in order to reduce costs - will see Japan have fewer major semiconductor firms but allow remaining companies to consolidate in key market segments.

Sources:

Japan electronics giants struggle to stay on top (26/02/09)
http://www.eetasia.com/ART_8800564487_480200_NT_8d3f19a9.HTM

Electronic Components
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