Panasonic to Move Certain LED Production Lines from Indonesia to Japan

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As part of its restructure efforts to raise LED profit margin, Panasonic will be shutting down its LED manufacturing factories in Indonesia while moving production to Japan, reported Nikkei Asian Review.

The Indonesian plant has been Panasonic’s main manufacturing base for LED lighting solutions. However, the company will close its overseas plant for LED products in West Java by the end of October. About 500 employees will be laid off from these restructures.

Panasonic’s main plant in Mie Prefecture in Japan will be taking over LED manufacturing. Although, the Indonesian plants LED manufacturing equipment will be shipped there, Panasonic has no intention of hiring new workers.

Up to 80% of the Indonesian plant’s output were shipped to the Japanese market, but the weak Japanese Yen raised import costs.

The Japanese company has not given up its plants in Indonesia entirely. LED products headed for the Southeast Asian and Chinese markets will be manufacturing in another Indonesian plant in East Java this year. Previously, the plant had been manufacturing fluorescent lights till end of June this year. The region’s lower production costs, including labor and land, than Jakarta area, were main factors behind Panasonic’s decision to move LED equipment there for export to make it more cost-competitive.

Company President Kazuhiro Tsuga is aiming to boost key segments with profit margins of 5% or less, as part of management reforms for the fiscal year through March 2016.

Panasonic’s lighting solutions revenues reached JYP 317.7 billion (US $2.52 billion) during the last fiscal year, and recorded an operating profit margin of 4.7%. The company aims to increase its margin to at least 6% this fiscal year.

Lighting solutions aside from bulbs and devices amounted to 60% of the segment sales. Its major source of earnings are also shifting from fluorescent lights to LED lighting. Panasonic is the top LED manufacturer in Japan, with a market share of about 40%.

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