China to replace Japan as Sony’s second-largest market

China will soon become the second-largest market for Sony Corp.’s electronics division, eclipsing sales from the company’s home market in Japan, a senior executive said Tuesday.

The growing importance of the Chinese market underscores the shift of economic power now under way in Asia. Where Japan once dominated sales of consumer electronics in the region, China’s fast-growing middle class has made its presence felt, snapping up more digital cameras and LCD (liquid crystal display) televisions than ever before.

“Sooner or later, that day will come when the business in China will exceed the one we have in Japan,” said Seiichi Kawasaki, the vice chairman and president of Sony (China) Ltd. He gave three years as his target to achieve that goal.

China is currently Sony’s third-largest market, behind the U.S. and Japan.

Sony China was established in 1997 and generated around US$20 million in revenue that year. Since then, sales of consumer electronics have risen 100-fold, hitting US$2 billion. Add sales of other electronic products and China accounted for nearly US$4 billion in revenue for Sony last year. “It’s not small,” Kawasaki said.

Because of its size and rapid growth, China is a strategic market for Sony. “All of the top management executives in Tokyo are involved in the China strategy,” Kawasaki said.

The key to that strategy is localization. Sony wants to be seen by Chinese consumers as the top electronics brand. The company has invested heavily in Chinese manufacturing plants and R&D facilities, and the majority of its employees are locals.

Still, Japanese companies are sometimes caught in political disputes with China, which feels Japan has not atoned for its wartime past.

In 2005, anti-Japanese protests were organized in major Chinese cities over a visit by Japan’s prime minister to a shrine where the spirits of Japanese killed during the Second World War, including convicted war criminals, are honored. These protests included a short-lived boycott of Japanese goods.

Sony executives are patient, taking a long-term view of the company’s business in China. As sales grow and the Chinese market develops, Sony China will increasingly reflect the local culture, as have subsidiaries in Europe and the U.S. “We should not expect a short-term return,” Kawasaki said.

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