Toshiba Corp. said it will cease mobile-phone handset production in Japan amid weak sales and will instead outsource production to cut costs.
The conglomerate will continue development and sales of handsets in Japan after stopping production in October. It will outsource production of typical handsets to companies overseas and focus on making high-end smart phones in China.
Toshiba predicts the move will save 4.5 billion yen, or about $45 million, in the fiscal year through next March. Other global handset makers, such as Motorola Inc., Nokia Corp. and Sony Ericsson Co., also are increasing outsourcing to cut costs.
Handset makers' profit margins have been squeezed by intensifying competition and a slump in demand amid the global recession.
Global sales of handsets in the first quarter fell 9.4% from a year earlier to 269 million units, according to research firm Gartner Inc. That was the biggest drop since 2001, when Gartner began monitoring the market on a quarterly basis.
Toshiba's mobile-phone business swung to an unspecified loss in the company's latest fiscal year. Handset sales fell by half to three million units, reducing handset revenue to 140 billion yen from 260 billion yen a year earlier.
Toshiba "made the right decision because they should cut production costs, which are higher in Japan," said Haruo Sato, an analyst at Tokai Tokyo Research Center Co.
To escape reliance on the shrinking Japanese market, Sharp Corp. pushed into China last year with high-end models. Sharp now expects handsets sales to increase to 12.3 million units in the fiscal year through next March. That would follow a 35% decline to 9.92 million units last fiscal year.
