Japan, once the centre of the world’s consumer electronics industry, has suffered a fresh blow to its collective corporate prestige after Panasonic warned that it expects to lose almost £6 billion this year.
TOKYO — After years of bets gone wrong and lost opportunities, three of Japan’s consumer electronics giants are showing some signs of faltering.
Japan is struggling to cope with the faded glory days of the late 1970s and early 1980s, when the country dominated the world of consumer electronics with color TVs and videocassette recorders, while their research labs gave birth to gadgets that would define an era: the Walkman, CD and DVD players.
Three Japanese giants are in trouble at the moment: Sony, Sharp and Panasonic. Though the three closed the first half in the fiscal year comfortably, the companies could get out of the depression with a change in leadership.
For Sony, the new president, Kazuo Hirai, has made an aggressive plan to help the company in reaching similar heights that it has used to be. It looks like that the Japanese International wants to deliver the results immediately.
On the same day, Panasonic’s shares lost a fifth of their value in Tokyo after the company forecast a 765 billion yen ($9.6 billion) annual net loss from write-downs in its solar-power, battery and mobile handset businesses.Panasonic, which has shed about 36,000 jobs, also skipped its dividend for the first time in more than six decades and cut its full-year TV sales forecast by more than a quarter to 9m sets
"Consumer needs have been changing and for too long Japanese electronics firms, like Sharp, with their size and heavy reliance on past successes, have been too slow to adapt," said Yuuki Sakurai, chief executive of Fukoku Capital Management.
"The fact that Sony managed to maintain profits shows management's strong will and commitment to continue cost cuts even while their product sales remain sluggish," said Takashi Hiroki, chief strategist at Monex Inc. "Compared [with] Panasonic and Sharp … Sony's earnings should get some credit.
"But we still don't see what their major earnings driver will be in the future."
“They really have to make decisions if they are going to stay in it at all frankly,” Raikes told TechEye. "They just cannot afford to chase market sure any more. The game’s up.”
The TV market has always been a tough one and extremely competitive to boot. That includes the all conquering Samsung, the most successful TV company ever in terms of market share, Raikes said.
Despite its huge dominance in the market, even Samsung has struggled to make any real dough from it endeavours.
“Presumably people go into the TV business for the prestige of being the big consumer item in the middle of the home, because it is very difficult to make a case for going into the market for profit,” Raikes said. “It is a long term problem.”
The outlook for Samsung is not so bleak, steaming ahead with OLED production, and leading just about everywhere else.
But with both Sony and Panasonic reporting massive losses the days of them leading in the industry are fast disappearing, and alongside Sharp, they must re-prioritise in order to claw back into the black.
According to Raikes they have been hit by a “triple whammy” of problems which have hampered sales. First of all, Sony is not producing flat panel displays, and Panasonic is producing the right type. Nearly all of the cost comes from the flat panel, and if a firm is not producing their own then they are going to struggle to make money.
Sony “missed the boat” by exiting the flat panel production too early. While Sony was able to charge a premium for its Trinitrons in the past, Raikes points out it can longer differentiate with its screens, and is instead handing cash over to the likes of Samsung to build them.
Panasonic might produce its own panels, but it has bet on the wrong horse after banking on plasma screens. Panasonic does have its own supply chain in plasma screens, but it is now producing much more than anyone wants to buy.
“You have to make bets when you are picking technologies, and they picked the wrong one,” Raikes said.
The second major problem is the strong yen, which has wreaked havoc with Japanese business for some time now. For Panasonic, basing its production in Japan means costs are very high.
Competitors have had more appealing balance sheets from buying in from Taiwan, for example, and leveraging cheap components and labour.
“Too much of their costs are in yen," Raikes said. "It is a problem for Japan inc, just look at the problems for most of the Japanese consumer electronics companies. Companies like Hitachi which is doing well on a profitable basis are almost out of consumer electronics because it is just too hard with the yen as it is.”
The domestic Japanese market has collapsed in recent years, thanks to a variety of factors.
“You had a real super-boom in the Japanese TV market in 2010, and into the first quarter of 2011,” Raikes said.
This was due to both the analogue switch off and government subsidies. An abrupt stop came with the end of the subsidies, while the need for replacements vanished when the analogue signal was turned off. With the tsunami hitting Japan that year, the situation was made even worse.
“All of that combined just absolutely decimated the TV market in Japan,” Raikes said.