In the 1980s and the 1990s, whenever a customer walks into an electronics store to buy a TV, his choices would almost always be either a Sony, a Sharp or a Panasonic. All were Japanese brands. But during the last decade, the story has become different. Korean brands like Samsung or LG, and even Chinese brands like TCL or Changhong, became the likely choices.
This change in consumer attitude is a result of aggressive efforts of Korean and Chinese manufacturers to challenge Japanese supremacy in the electronics market. For instance, when Samsung began massively selling LCD TVs in the mid 2000s, they offered them in much lower price than what Japanese brands would offer. But instead of matching the prices offered by Samsung, Japanese brands joined hands in camaraderie to keep their prices, perhaps thinking that, as the traditional dominant TV manufacturers, they have a solid market base. The result was devastating: Samsung took over that market base in just a couple of years.
The decline of Japanese electronics industry was historic. In 2011 alone, Sony, Sharp and Panasonic registered a combined $20 billion losses. (Note: For the first half of 2012 alone, these three companies posted a combined losses of $12.5 billion -J) In contrast, Samsung made a historic profit of $15 billion. As a result, Sony, Sharp, and Panasonic let out waves of massive job cuts and plant closures throughout Japan and in countries where they operate. The gloomy reality is not confined in these three consumer electronics giants of Japan; the consumer electronics segments of such Japanese titans as Hitachi, Toshiba, NEC and Fujitsu have also been losing money for several years now.
It’s impossible not to miss the paradox: Japan’s electronics industry remains the world’s biggest and most technologically sophisticated, yet it’s also the fastest-shrinking industry of its kind in the world.
Yet, there are ways to revive the ailing titans. For instance, while Toshiba’s consumer electronics business is posting losses, its overall financial shape remains good. This is due to the company’s highly diversified business structure. It produces LCD TV, home appliances, medical devices, power plant turbines, railway equipment elevators, semiconductors and nuclear reactors. This model insulated Toshiba from the threat of Korean and Chinese competition.
Another way out for Japanese electronics firms is to look for meaningful innovation. For instance, who would have thought that Apple, which almost went on the brink of collapse in the 1990’s, would rise to become the most important electronics-technology company today? Apple came back to the limelight when it revolutionized portable music players in early 2000’s by releasing the iPod, which evolved into the iPhone and the iPad. This innovative streak brought Apple back as a major player in the electronics-technology industry.
Sony itself has a rich history of innovation, creating the likes of Walkman and PlayStation. Innovations like these create new markets, which drive the growth of a company. Unfortunately, Sony’s creative side seems to be in a state of malaise; we haven’t seen any ground-breaking innovation from the company in the past few years.
Finally, perhaps Japan’s titans should give the home appliances and consumer electronics market up and find another niche. Samsung and Changhong can produce LCD TVs efficiently, but they are trailing their Japanese counterparts in terms of developing sophisticated high technologies. Japan, for instance, is a pioneer in the development and production of the Lithium-Ion battery, which is at the center of the quest to come up with durable batteries for electric cars. Perhaps focusing on these kinds of high technology production, on which Japan has an overwhelming comparative advantage, is the best way to revive Japan’s electronics industry.
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