Japan’s Sony Group has surpassed Samsung Electronics in operating profit for the first time in 24 years. Just 14 years ago, the combined operating profit of nine major Japanese electronics companies did not even reach half of Samsung Electronics’. With Sony’s strong performance last year, however, it is estimated that Sony’s operating profit exceeded Samsung Electronics by about 3 trillion won.
According to the 2023 performance forecasts announced by Sony Group and Samsung Electronics on Jan. 30, it has been estimated that Sony’s operating profit for the previous year was 1.17 trillion yen (US$7.95 billion), surpassing Samsung Electronics’ 7.49 trillion won (US$5.62 billion) by more than 3 trillion won. This marks the first time in 24 years since 1999 that Samsung Electronics’ operating profit has lagged behind Sony. In 2018, the operating profit gap between Samsung Electronics at 58.89 trillion won and Sony at 8.07 trillion won reached up to 50 trillion won. However, the situation has reversed in the last five years.
The revenue gap between Samsung Electronics at 302 trillion won and Sony at 1.15 trillion yen also widened to nearly three times in 2022. However, it narrowed to around two times last year, with each reaching 262 trillion won and 12 trillion yen, respectively. Experts have analyzed that the temporary downturn in Samsung Electronics’ performance is a result of the semiconductor market slump. As Samsung Electronics’ performance is expected to recover somewhat this year, many anticipate it will once again catch up with Sony.
However, analysts say that the fact of the operating profit of South Korea’s largest company trailing behind a leading Japanese electronics company for the first time since the 2000s carries significant meaning.
In 2009, the combined operating profit of nine major Japanese electronics companies, including Sony, Panasonic, and Hitachi, did not even reach half of Samsung Electronics’. Sony incurred operating losses of 227.8 billion yen and 67.3 billion yen in 2008 and 2011, respectively. However, the operating profit, which was only 26.5 billion yen in 2013, increased by nearly 50 times over the next 10 years. Revenue also surpassed 10 trillion yen for the first time in 2022, reaching 11.54 trillion yen. It is estimated to have further increased to 12.4 trillion yen last year.
The revival of another leading Japanese electronics company, Hitachi, is also gaining attention. In 2008, Hitachi incurred a loss of 787.3 billion yen, marking the worst record in the history of Japanese manufacturing. Over the course of 10 years from 2001 to 2010, the cumulative losses amounted to a whopping 1 trillion yen. However, Hitachi has transformed into a consistently profitable company despite changes in the business environment such as the Great East Japan Earthquake, significant exchange rate fluctuations, and the impact of COVID-19 since 2010. After the spread of COVID-19 in 2019, Hitachi’s operating profit has surpassed 500 billion yen for four consecutive years. It is estimated to have recorded a profit of 720 billion yen last year.
Experts attribute the revival of Sony and Hitachi to factors such as globalization, business restructuring, digital transformation, and aggressive mergers and acquisitions. They said the two companies streamlined their large-scale operations through bold business restructuring and increased their information technology (IT) competitiveness and global market share through active M&A activities. Sony Group reduced the proportion of the electronics business, which accounted for 68 percent of revenue in 2012 but failed to generate profits, to 34 percent last year. Meanwhile, it raised the proportion of the lucrative entertainment business from 17 percent to 51 percent during the same period.
With this performance growth, Sony’s stock price on the Tokyo Stock Exchange has increased by 10.58 percent from the beginning of the year to the end of the month, surpassing the rise in the Nikkei 225 index, which increased by 8.34 percent during the same period. Hitachi’s stock price has also recorded a rise of 11.5 percent from the beginning to the end of the month.