Fitch has downgraded Sony and Panasonic to its junk rating, citing ongoing weaknesses in the two companies businesses as the reason for the downgrade.
The move marks a three grade downgrade for Sony, from BBB minus to BB-minus and a two stage downgrade for Panasonic down from BBB- to BB.
Fitch's head of Asia pacific TMT ratings Steve Durose said Sony's difficulties appeared the greater of the two, warning that it is losing its hold on its core electronics market.
"Fitch believes that Sony is substantially more reliant on a strong turnaround in its core electronics segments than Panasonic. In particular we believe that Sony will struggle to record operating profits in its home entertainment, mobile phone and PC product divisions over the short-to-medium term," he said.
"Our view is that Panasonic, with its slightly stronger product portfolio, including a comparatively stable appliance business, is ahead of Sony in its turnaround efforts."
The two companies have seen their fortunes undermined, having been blindsided by the likes of Apple and Samsung.
Recent figures from research firm Gartner underscore Samsung's strengthening position, after it showed it had increased its share of the mobile market to 22.9 percent for the third quarter of 2012, up from 18.7 percent in the same period last year.
Forrester analyst James McQuivey said Sony and Panasonic had become victims out outdated development processes.
"Even as companies like Apple, Samsung, and even Microsoft have shown that the future of technology devices is more about the experience than about the engineering, Sony and others have continued to insist on an engineering-led model where smart people in labs far from real consumers make product decisions without seeing the big picture of how those products will be used," said McQuivey.
"That may have worked fine in the 1980s and 1990s, but it was already inadequate to the task of innovating in the past decade and now it's catching up with them."
Apple and Samsung's dominance of numerous core technology markets has caused trouble for numerous other competitors as well.
Prior to Sony and Panasonic, Finnish smartphone maker Nokia had suffered a similar fate when Standard & Poor's downgraded its rating earlier in August.
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