To reduce cost off its books, Hitachi , Ltd. (HIT), based in Tokyo may use local contract manufacturers to make TVs overseas – the U.S. and Europe, according to some sources. There are no details as to what type of TVs (plasma or LCD) the company will outsource.
 
Hitachi is facing a sharp rise in the cost of raw materials, while at the same time finished product prices have been falling, a trend expected to continue over the near-term. Hitachi’s fiscal 2008 results were below expectation as the company experienced weakness across all of its segments.

Hitachi posted the largest loss in the company’s history in fiscal 2008. Operating profit also declined 63.2% in 2008 from fiscal 2007.
 
Thus to reduce operating expenses and improve margins, the company may outsource production abroad, which will lead to lower procurement costs thereby improving its cost structure. To turn around its loss-making TV business, which led to a revenue decline of 16.2% in fiscal 2008 in the Digital Media & Consumer Products segment, the company may outsource more of its manufacturing processes and procuring key components from suppliers outside the company.
 
To align cost structure, Hitachi also implemented business restructuring measures to build a high-earnings framework and reinforce its financial position.
 
Hitachi undertook certain structural and cost reforms on a group-wide basis. As part of these efforts, Hitachi’s spun-off the Automotive Systems Group and Consumer Business Group from the parent company on July 1, 2009 with the goal of building a framework that can consistently generate stable earnings by making them separate proper centers.
 
With the ever-intensifying pricing pressure, decline in demand for TVs, and escalating development costs, other Japanese companies such as Sony (SNE), Sharp Corp., Toshiba and Sanyo Electric may also resort to outsourcing to keep their books in good shape.

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