Sony Corp said it would sell an LCD TV assembly plant in Mexico to Taiwan's Hon Hai Precision Industry in a bid to cut costs by contracting out production and turn around its loss-making TV operations.
The world's second-largest LCD TV maker behind Samsung Electronics Co Ltd did not disclose financial terms, but analysts in Taiwan estimated the deal could be worth around T$4 billion ($121 million).
Sony's flat TV business has been in the red for five straight years due to fierce price competition with Samsung, a firmer yen and the global economic downturn, dragging down the electronics and entertainment conglomerate's overall earnings performance.
Sony, which booked an operating loss of $2.45 billion for the year ended March 2009, is cutting 16,000 jobs, closing eight manufacturing sites and halving its suppliers.
Internal production at Sony comes with higher costs at the moment. This should be a positive move, Mizuho Securities analyst Ryosuke Katsura said on Tuesday.
But there are concerns. Contracting out actual production may make it difficult to reflect technological advances in its products in a timely manner.
Sony said it would sell 90 percent of its stake in Sony Baja California, which has 3,300 employees and assembles LCD TVs in Tijuana City, to Hon Hai, a Taiwan-based maker of such gadgets as Apple Inc's iPhone and Nintendo Co's Wii.
Sony will retain a 10 percent stake in the plant and outsource assembly to Hon Hai.
Hon Hai already makes many of Sony's products, including its Playstation game consoles, Bravia TVs and other consumer electronic devices.
The 3,300 employees at the Mexican plant would make up just over 1 percent of Hon Hai's 200,000 strong workforce, according to the company's website.
Sony did not give output capacity of the plant, but analysts expect the plant to ship over 1 million television sets every year.
Sony sold about 1.75 million televisions in the United States in the first half of this year, according to research firm iSuppli, and is currently the country's third-largest TV brand by market share.
Sony has said it will outsource more production to allow it to focus its resources on development and design.
Many of the world's top technology brands typically do their own design work but outsource the manufacturing process to firms such as Hon Hai and Singapore-based Flextronics, who operate large production facilities in lower-cost countries.
Shares in Sony closed up 0.2 percent at 2,520 yen, underperforming the Tokyo stock market's electrical machinery index .IELEC.T, which gained 0.9 percent.
(Additional reporting by Taiga Uranaka, Editing by Edwina Gibbs)