Sony Will Introduce Xperia Tablet to Challenge Apple
Comment of the Day

January 19 2013

Commentary by Eoin Treacy

Sony Will Introduce Xperia Tablet to Challenge Apple

This article by Mariko Yasu for Bloomberg may be of interest to subscribers. Here is a section
Sony Chief Executive Officer Kazuo Hirai is focusing on mobile devices to revive the company, whose TV unit has been unprofitable for eight straight fiscal years. The Tokyo-based company introduced its first tablet model in 2011, making it the last among the world's top 10 laptop makers to tap the surging demand triggered by Apple's iPad.

Worldwide tablet shipments probably totaled 120 million last year and may reach 340 million by 2016, market researcher IHS Inc.'s iSuppli said in December.

Eoin Treacy's view Japan's export led sector is perhaps the greatest beneficiary of the Yen's weakness. Following an explosive move from mid-December, the Dollar has moved into a slower period of appreciation against the Yen defined by a progression of higher reaction lows. The most recent touchstone in that sequence is at ¥88 and a sustained move below that level would be required to question the consistency of the advance. Despite the speed with which the Yen has declined over the last month or so, it is worth bearing in mind just how strong it had become, following a five-year advance. The break in the Dollar's downtrend against the Yen suggests that while overbought in the short-term, medium-term potential for additional Dollar strength remains considerable.

While Japan's export sector suffered during the Yen's appreciation, other countries' gained a competitive advantage. Perhaps the most notable of these has been South Korea. The Won halved against the Yen from its 2007 peak to its 2008 low handing companies such as Samsung, Kia and Hyundai an edge versus their Japanese competitors. The KRW/JPY exchange rate spent much of the last four years ranging and the Won has rallied against the Yen for 14 of the last 15 weeks and is testing the upper side of its base. Some consolidation of recent gains appears likely at this stage but a sustained move below ¥7.5 would be required to question medium-term potential for additional Yen weakness.

While the short-term advance has been impressive, the appreciation of the Won to date has probably not yet been enough to threaten the health of Korea's export sector. However, the more the Yen weakens the greater the influence currency differentials are likely to have on competitiveness. The relative performance of Samsung compared to Sony offers some valuable insights. Until 2008 Samsung and Sony performed more or less in line with one another. Between 2008 and 2011 Samsung outperformed but this pattern accelerated over the last 18 months hitting a peak of 1800 in December. Since the Japanese intervention to weaken the Yen, the ratio has reversed course and experienced by far its largest pull back in a decade. The medium-term outlook is now for a further outperformance by Sony.

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