The move is part of a cunning plan to re-enter overseas markets this fiscal year.
According to the Nikkei Daily, Panasonic, which is expected to lose $9.7 billion for the business year ended on Saturday, makes about half of its handsets in Japan and will become the first Japanese maker to produce all of its handsets abroad.
The news comes after the company announced that its head of its loss-making TV business, Kazuhiro Tsuga will become the company's new president.
Panasonic sold around five million handsets in the just-ended fiscal term, making it the number three domestic manufacturer behind Sharp and Fujitsu.
The Shizuoka factory, which accounts for nearly half of the firm's output, will be moved to Beijing and Malaysia and some will be outsourced to overseas manufacturers.
However production of some Japanese handsets may remain in Japan.
In 2005 Panasonic pulled out of overseas markets in 2005 but it plans to re-enter them in April, introducing smartphones in Europe.
The plan is to triple its unit sales to 15 million by fiscal 2015/16, with nine million coming from foreign parts.