Japanese diversified electronics makers will see robust earnings in the next few years as they compete with peers abroad through efforts that boost and diversify business segments, S&P Global Ratings said in a recent release.
The eight major players in the segments have adjusted their business focus over the past 10 to 15 years, resulting in steadier and more profitable business blends, the rating agency said.
These changes involve a shift from traditional electronics products to non-electronics segments such as entertainment, service solutions, IT services, and branded consumer appliances.
The nontraditional segments offer steady income from subscriptions, long-term contracts, after-sales services, and customer loyalty, S&P said.
A narrower risk of technological innovation in these areas also makes sustaining a competitive advantage easier, according to S&P.
The major companies include Sony Group (TYO:6758), Hitachi (TYO:6501), Mitsubishi Electric (TYO:6503), Panasonic Holdings (TYO:6752), NEC (TYO:6701), Fujitsu (TYO:6702), Toshiba (TYO:6588), and Sharp (TYO:6753).
Further portfolio review and bolstering will be crucial for the companies' credit quality amid elevated competition abroad and a fast-changing business environment, S&P said.
Ensuing growth investments could hit the companies' financial metrics, although controlled financial management should be a mitigating factor, S&P said.
The rating agency expects the companies to broadly cover expenditure with operating cash flow, with potential asset sales to ease a marked rise in financial burden.