SONY CORPORATION: Productivity is the key factor for a Japanese electronics
giant that is expanding its presence in Thailand

Looking long-term, Sony Corporation of Japan, the entertainment systems and electronics producer, plans to expand its investment in Thailand.

‘It’s more fortunate for us that employees are sticking to their jobs and improving productivity, as in the early days job-hopping was very common and all our training and skills improvements went down the drain’
SHINSUKE YOSHIDA
Managing director

In the past decade, it has invested more than three billion baht in Thailand and now runs six subsidiaries, four of which make products ranging from semiconductors to televisions.
Sony which had previously imported products for distribution in Thailand as a joint venture with Sun-shine Co, set up its first Thai factory, Sony Magnetic Products (Thailand) in 1987 to make audio and micro cassette tapes. It expanded its operations to include alkaline batteries in December 1996.

"We selected Thailand for investment about 10 years ago. Before that we had local producers who bought components and assembled them in Thailand for local sale," said Shinsuke Yoshida, managing director of Sony Thai.

In 1988, Sony established two more factories, one to make semiconductors and the other andio-visual equipment.

Sony Semiconductor, which has Board of Investment privileges, is one of the group's biggest investments in Thailand. The company, the first overseas subsidiary of the group's semiconductor business, makes several different kinds of integrated circuits.

Sony Siam Industries makes colour televisions, video and cassette recorders, and audio equipment, as well as components for television plants in Malaysia and Singapore.

In 1995, Sony established Sony Mobile Electronic Co Thailand (SMET) to make car radios, tape and compact disc players, as well as decks for tapes and CD players. It was the first time the group had made these products outside of Japan.

According to Mr Yoshida, Thailand is ranked, third in terms of importance to Sony's operations in Asean. Singapore and Malaysia are considered to be joint leaders in terms of investment with an estimated $1.5 billion in each country.

But Malaysia produces more in terms of volume because most investment in Singapore has been for manufacturing of television tubes.

"We mostly export from Thailand. The semiconductor plant serves other Sony companies globally. The audio-visual products are divided evenly between domestic consumption and export. SMET's products are mostly export-oriented, as are the magnetic audio-visual products,"Mr Yoshida said.

"Sony's policy is to be where the market exists. The incentives that we received from the investment board, the government support, political and social stability, and the availability of competitive labour, all contributed to the decision to invest in Thailand."

Worker productivity was among the most important points considered when investing in electronics. Thai employees had a good skills base but their productivity could be improved, he said, adding hat the recession had resulted in a small improvement as employees feared they might lose their jobs.

"It's more fortunate for us that employees are sticking to their jobs and improving productivity, as in the early days job-hopping was very com-mon and all our training and skills improvements went down the drain.

"Productivity is the key to this industry. If the yen depreciates, the only thing that will make us competitive is productivity; it's not the time you spend in the company, but how you spend the time," he said.

"The local economy has had little impact on us. Three of the six companies are either totally export-oriented or the bulk of their products are exported. But a global slowdown would have an impact on them."

Despite the depreciation of the yen against the US dollar, Sony had not moved its production back to Japan. "Currency is just one factor; labour and other costs are also important."

Although the Thai market for electronic con-sumer goods is down by as much as 60% from the same time last year, Sony claims its volume had shrunk by only 15% because of its vigorous marketing. Mr Yoshida said buyers of electronic products were very selective.

Manufacturers were not offering big discounts because there was very little profit margin in electronics.

"Therefore the best way for us to be competitive is to cut costs, improve the skills of employ-ees, operations and production standards, and concentrate on new products," Mr Yoshida said. "W,e have reduced our stocks and, with the inventory in a healthy position, money is rotating much faster."

Access to finance is another problem for many companies. Sony's Thai operations did at first seek help from the parent company in terms of liquidity, but after realising that the problem could be resolved by restructuring the local com-panies, they dropped their request.

The parent company helps with training employees and providing the latest technology for innovative products. According to Mr Yoshida, the future lies with digital technology, and Sony's companies in Thailand are gearing up for this big change,

In coming months, Sony plans to introduce new products including more models of the VEGA colour television and promote use of Mini Disks and digital cameras. Other digital products will follow as the company wants to be ready for the change in consumer spending pat-terns when the economy recovers,

Sony also recently completed the expansion of its factory making semiconductors and magnetic audio-visual products. More expansion of other types of manufacturing would follow, he said.

Sony Group of Companies (Thailand)
Established in Thailand: 1988
Major shareholders: Sony Corp of Japan, local investors
Registered capital: 1.8 billion baht including all subsidiaries
Main business activities: Manufacturing of semiconductors, electrical appliances, mobile electronics, magnetic products, marketing and logistics
Subsidiaries: Sony Semiconductor (Thailand), Sony Siam Industries, Sony Mobile Electronics (Thailand), Sony Magnetic Products (Thailand), Sony Thai Co, Ltd, and Sony Logistics (Thailand)
Number of employees: More than 4,000
Gross revenue for 1997: 8.3 billion baht for Sony Thai Co Ltd

Worldwide
Headquarters: Tokyo
Number of employees: 173,000
Gross revenue for 1997: US$51.18 billion
Net profit for 1997: $1.68 billion
Total assets for 1997: $48.5 billion