Panasonic's green leap a test for Japan

From: search.japantimes.co.jp/cgi-bin/nb20091211a1.html

Electronics giant will branch out in a new way

Panasonic Corp., though dogged by repeated delays, finally announced Thursday it acquired a 50.19 percent stake in smaller Sanyo Electric Co. for ¥403.78 billion as it makes headway in its transition into a green consumer electronics giant that can remain globally competitive in the decades ahead.

The rise of the solar and battery behemoth will pose a key litmus test for Japan’s struggling electronics industry as its traditional gadgets and appliances lose their spark on steep price declines driven by overseas rivals.

“This is probably the first time we are seeing a strong consumer brand . . . really trying to push the consumer end solution” with products ranging from solar cells and rechargeable batteries to consumer products, said David Gibson, head of research at Macquarie Securities Ltd. in Tokyo. “The combination is really quite a change in the business.”

Panasonic, formerly Matsushita Electric Industrial Co., sealed the deal following months of grueling talks with authorities worldwide to clear antitrust hurdles over the firms’ substantial share in the rechargeable battery business.

The merger will create Japan’s second-largest electronics conglomerate, trailing only Hitachi Ltd.

But with double-digit operating margins unlikely through sales of plasma display televisions and household appliances like refrigerators, Panasonic aims to tap into an increasingly lucrative market for lithium ion batteries, especially for use in cars.

“With economic conditions tough, we need an additional engine to achieve the growth we are aiming for,” Panasonic President Fumio Otsubo said earlier, emphasizing that “bold measures” are needed to combat the crisis that has dragged both Panasonic and Sanyo into the red.

By bringing Sanyo, the world’s top supplier of lithium ion batteries, under its wing, Panasonic will likely hold a combined market share of around 30 percent globally, compared with about 9 percent now in terms of production capacity, according to Macquarie Research.

Its estimates also show rechargeable batteries will represent about 20 percent of the combined operating profit of Panasonic and Sanyo by the 2010 business year.

Global demand for lithium ion batteries for gas-electric hybrids and zero-emission electric vehicles is expected to surge with governments around the world scrambling to meet stringent targets to reduce carbon dioxide emissions.

The global market value for lithium ion batteries in vehicles is expected to reach ¥2.25 trillion in 2014, compared with an anticipated ¥25 billion in 2009, according to market research firm Fuji Keizai Co.

Sanyo currently supplies nickel metal hydride batteries to several automakers, including Honda Motor Co., Ford Motor Co. and Volkswagen AG, while Panasonic makes hybrid vehicle batteries for Toyota Motor Corp. through a joint venture.

But to clear antitrust regulations, Panasonic plans to more than halve its equity stake in Panasonic EV Energy Co., the Toyota joint venture, while Sanyo is expected to sell parts of its rechargeable battery business to FDK Corp., a Fujitsu Ltd. unit.

While scaling down some operations, the two companies will still overwhelm domestic rivals such as Toshiba Corp. and NEC Corp.

Other players, meanwhile, including Sony Corp. are eyeing entering the exploding market.

Competition is also fierce and crowded outside Japan as new players like LG Chem Ltd. and Samsung SDI Co. of South Korea and A123Systems Inc. of the United States expand their footprint.

“There’s going to be plenty of players and it’s going to be a growing segment,” Macquarie’s Gibson said.

“If you are the biggest in the growing segment and you are not losing share, then you’re going to have pretty substantial growth in the next decade or two,” he added.