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Japanese electronics industry’s changing landscape

By Dominique Numakura

The number of large, electronics OEM companies in Japan reached more than a dozen during the hay days of the ‘80s. The global electronics market continuously expanded during this decade, justifying the number of companies in industry.

Most of the Japanese electronics manufacturers took advantage of the exporting business because the domestic market was saturated with competition.

Over past twenty years, Korean and Taiwanese electronics manufacturers have nibbled their way into the global consumer electronics market, and Chinese manufacturers have gained a considerable foothold during the past decade.

Today, the Japanese electronics manufacturing industry market pie is not large enough to share with all Japanese manufacturers if they each want to remain in low-cost, consumer product markets. There are simply too many Japanese electronics manufacturers, and they must change business direction to survive increased competition within the market.

Unfortunately, many Japanese electronics companies are too big to quickly change direction, and recent changes announced by many of these companies do not appear to be very intelligent.

Several company announcements and strategy changes by major Japanese manufacturers transpired over the last few months.

Matsushita Electric Industry sold its entire stake in JVC (one of the world’s leading electronics manufacturers of audio visual equipment) because of poor performance. JVC will now collaborate with Kenwood (another major Japanese audio equipment manufacturer) in order to survive in the industry.

Additionally, Sanyo has posted significant losses over the last few years and most of the Company’s management has recently resigned. Sanyo has decided, in the near future, it will cut off several major business segments that include cellular phones.

Sony, a longstanding global consumer electronics giant, has made the decision to shut down its semiconductor manufacturing and sell the operations to Toshiba.

Meanwhile, the most recent news published last week involved Sharp, the largest LCD device manufacturer in Japan, announcing Sharp’s intentions to buy a 15% stake in Pioneer, another major AV equipment supplier and, the second largest Plasma Display Panel (PDP) device manufacturer in Japan.

Both companies stated they do not intend to merge, but will maintain a tight business relationship with one another. The Japanese Media are speculating on the next company to broadcast a major business development; Hitachi or perhaps, Fujitsu?

Japanese electronics company redeployment of resources plus changes with numerous retailers with Japan’s consumer electronics market are affecting Japanese manufacturers.

Big Camera and Best Denki, the sixth and seventh largest retailers within the consumer electrical and electronics market, announced intentions to merge last week in an effort to try and survive a competitive consumer electronics market. The combined company will be the second largest retailer after Japanese consumer retail giant Yamada Denki.

Big Camera and Best Denki explained they can be more competitive with Yamada by joining forces.

The most recent restructuring plans announced by Japanese electronics companies are focused on extricating these companies from non-profitable divisions, and promoting additional growing through mergers and acquisitions. It seems Japanese electronics companies are taking a page out of the same business playbook as that used by the Americans’.

Some say 1 + 1 will equal more than 2 through collaborative efforts of different companies. Historically, the industry track record for companies becoming successful post the period of merger or acquisition is not very good. For these companies, 1 + 1 equals less than 2.

It is common whereby total revenue from the post-merger company may be larger, but total income may not necessarily increase.

New business models from some of the Japanese electronics companies will provide some short-term positive results, but longer term; the business models could struggle if companies do not improve upon their bread and butter functions — such as manufacturing.

Without improving on what Japanese electronics manufacturers do best, their future may be bleak.

Source: EPT Newsletter




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