JAPAN’S electronics giants, say the pundits, are on the brink of collapse. Not only have they become less competitive than their cheaper South Korean rivals, they have also lost the lead they once held in cutting-edge technologies. But while there is no shortage of evidence to support these ideas, it would be unwise to write off the Japanese just yet.

The critics point to companies such as Sony, Panasonic and Sharp, three of Japan’s biggest consumer electronics companies. All recently announced massive losses, while competitors such as Apple and South Korea’s Samsung have continued to grow.

Last month, Sony announced a US$5.7 billion (S$7.3 billion) loss for the fiscal year ending in March, its fourth consecutive year in the red. Sharp lost US$4.7 billion, prompting the company to sell 9.9 per cent of its shares to Taiwan’s Hon Hai Group. Panasonic’s losses were even larger, chalking up a record US$9.7 billion. Other less well-known Japanese companies such as semiconductor maker Renesas Electronics have also been reporting losses.

Osaka-based Panasonic is considering shrinking its main office by between 3,000 and 4,000 staff, mainly through early retirements and employee transfers to subsidiaries. The company has already announced a major restructuring of its liquid crystal display (LCD) manufacturing division, and is reportedly considering shifting all of its mobile phone handset production overseas amid high costs at home.

In early April, Sony similarly announced it was laying off 10,000 employees, or about 6 per cent of its workforce. Renesas Electronics is also shedding employees.

Explaining these setbacks, Japanese electronics firms point to the appreciation of the yen, which makes exporters’ products less competitive overseas. Falling prices and slow demand at home have also eaten into profits.

But critics say these companies only have themselves to blame. A recent article in Fortune magazine cited arrogance and failure to follow the changes of the times. Japanese electronics companies, added the magazine, failed to understand the significance of the Web in changing consumer preferences. They also made the critical mistake of cutting back spending on R&D.

There is some truth in this, of course. But Japanese electronics companies should not take all the blame. Writing them off as behemoths unable to adapt to new circumstances also seems premature.

A strong currency makes life tough when you are faced with increasingly sophisticated rivals making cheaper products. And the Japanese companies that moved production to Thailand in an effort to lower costs can hardly be blamed for the severe flooding in that country that disrupted production last year.

Not all Japanese electronics manufacturers have been neglecting R&D either. Earlier this month, Sharp announced that it had developed technology to make images more vivid on organic electroluminescent (OEL) display panels for smartphones and other electronic products.

The technology involves use of an indium-gallium-zinc oxide semiconductor, a new material Sharp already employs to increase the picture definition on its liquid crystal panels.

The LCD display requires a light source in the back of a screen, while in the OEL panel, organic materials sandwiched by glass sheets illuminate by themselves, producing a thinner, brighter screen.

Admittedly, R&D has sometimes focused on the wrong areas. Panasonic made “excessive” investments in plasma and LCD televisions, president Fumio Ohtsubo told reporters last week. With television sales falling, “we regret the decision we made”.

And while some of the major players in the Japanese electronics industry can be accused of losing sight of customer preferences, others in the broader industry remain very customer-focused.

Many people in Japan have been concerned about radiation since the quake and tsunami of March 2011 sparked a crisis at the Fukushima atomic plant.

Realising that worries about radioactive leaks have sent demand for radiation-measuring devices soaring, local mobile phone operator Softbank last month unveiled a smartphone that can do the job.

New corporate structures are also being explored in an effort to regain market share from South Korean rivals.
Reports say Sony and Panasonic are considering joining forces to produce next-generation television.

Meanwhile, the idea that Japanese electronics firms are in decline globally needs to be balanced by the realisation that – in some markets at least – they are doing very well indeed.

In India especially, companies such as Sony and Panasonic have more than held their own against the onslaught of South Korean rivals.

Indian consumers, say local marketing experts, still trust Japanese brands to deliver quality.
Japanese electronics companies may be struggling, but it is too early to write them off.

(C) Singapore Press Holdings Limited