Japanese electronic giant Sony’s recent move to close its laptop business has raised some concerns over its operations in India. In an interview to The Hindu, Sony India’s Managing Director Kenichiro Hibi expressed confidence that India business would register a 20 per cent growth this fiscal over the previous one, driven by smartphones and televisions . Edited excerpts:
Sony has seen many structural changes recently, with its laptop business (Vaio) being shut down and also its television business being hived into a separate entity. What impact would these have on the company’s operations in India?
In February, the headquarters made a very tough decision to shut down the Vaio business globally, not just in India. It was a strategic call. The market, worldwide, is moving towards mobile devices. The PC market is seeing negative growth globally.
Vaio sales will stop in India by June-July. Of course, we will continue to provide after-sales support for these products for consumers who have already bought it.
As part of the restructuring plan, the television (TV) business is to be hived off into a separate unit which will be established by July. This decision is from the headquarters side. From Sony India’s perspective, there is no change as under Sony India we have a separate TV division and mobile division under me. This structure will not change.
Only change that will be is that while laptop business is closed, we have a lot of technician and engineers working under that unit. They will be shifted to the more growing segment that is mobile phones and tablets… mobile phones business will take the place of Vaio business. This segment is growing but [in the] PC business we cannot expect so much growth. We cannot make good business there and hence [are] shifting focus to growing areas.
How many people were there in Vaio business that has been shifted?
We cannot share the segregated number. All I can say is that as our focus shifts to mobile business, we will need manpower there. We will be moving employees from the laptop segment to mobile phone division. There will be no cut out or lay offs. We will put resources in developing the mobile business, which is the future growth area.
What impact will shutting the laptop business have on the India business, in terms of revenues?
Now that we are closing the business, of course, sales will be zero. However, in contrast, we have other categories such as television that is growing. The growth in other categories will nullify the impact of closing of the laptop business.
We closed last year (April-March 2014) at Rs.10,000 crore. Of this, Rs.1,500 crore was from Vaio business. So, now, even after removing Rs.1,500 crore of the laptop business, we are looking at 20 per cent growth this year. We are expecting revenues of Rs.12,000 crore even after Vaio has been shut down due to growth in other categories.
Of the Rs.10,000 crore business, what is the contribution of mobile as well as the television business? What are the expectations for growth in the two categories?
Mobile phones business accounted for about 30 per cent or Rs.3,000 crore of the revenues and TV business contributed 35 per cent of Rs.3,500 crore. Both these segments will continue to grow. However, mobiles will over-pace the growth of TV as the industry is bigger. We expect mobile business’ contribution to our total revenues to grow to Rs.5,500 crore.
I cannot tell the exact per cent but growth of mobile business will be bigger than TV. But this doesn’t mean that TV is not growing. It is also very big.
The mobile phone business is relatively new for Sony India. How is that shaping up?
Yes, the mobile business is quite new. We started selling handsets exclusively from Sony about a year back. Our progress is relatively good. Last year, we launched Z and Z1 and the response has been great. We have been able to build good brand recognition in mobile business.
According to GfK (a research firm), within one year, we have captured about 10 per cent value share and 6 per cent volume share of Indian smartphone market. That is why I say we have made good progress in just one year. Still there are many things to do. We are in the middle, we are not satisfied. We are now kicking the second year and expect further growth and increase our share.
This market itself is growing a lot but we always try to move ahead of the market. We have now launched the Z2, which will drive growth in our premium segment.
How many more devices can we expect Sony to launch this year?
In India, this year, we plan to launch over 30 new smartphone models. We will also be expanding the distribution network to reach 12,000 touch-points, including 500 exclusive Xperia Lounge Stores.
How much would you be investing this year for product marketing?
This year we have kept our total marketing budget at Rs. 800 crore. Of this, Rs.350 crore is for mobile phones business and nearly the same amount will be used for the TV business. The amount will be spent on ATL (above the line) as well as BTL (below the line) activities.
How do you see premium category of devices doing? A lot of companies are launching devices that cost nearly half a lakh. What kind of demand is there?
The demand is there. According to Gfk data, of the total market, phones priced above Rs.30,000, account for over 20 per cent share in value terms.
This means that there are substantial number of people looking for premium phones. We have a lot of room to play.
What about premium TV segment, how is that growing?
In the premium TV segment, we are quite dominant. It is growing as people are looking for bigger-sized screens. At the same time, a lot of upcountry customers still have CRT TVs, they are replacing and moving to LCD/LEDs. This opportunity is huge.
Do you plan to set up a manufacturing unit here?
We are always in discussion. We have been exploring possibilities of manufacturing in India.
However, we have not taken a decision yet. While we do not have an assembly unit here, we do have a software and research centre in Bangalore where we have about 1,500 people. They develop applications to be used not just for India, but globally.
Wouldn’t a manufacturing unit here help bring down the prices, which can be beneficial especially in a market like India?
Sony needs to be always premium. For Sony, the Rs.20,000-25,000 price range sees the maximum sales. We have sub-Rs.10,000 products too but will continue to position ourselves as a premium brand.
Has the low consumer sentiment had any impact on sales for you in the past few months?
No, we have not seen any impact. In fact, we have seen good sales in the consumer segment despite the general elections. However, there is a little impact on the B2B business.
It has suffered a bit because of cut in budgets…businesses are cutting their spending. (B2B business includes broadcasting, supply of hardware such as screen and security systems to enterprises.) Consumer business contributes about 80 per cent to the total business, but I believe B2B has good scope as well.
Business is going strong. We closed the April-March 2013 fiscal year at Rs.8,000 crore and last year we had revenues of Rs.10,000 crore. This is a substantial growth.