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What happened to Japanese electronics?

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Sony was once the envy of both Apple and Samsung electronics. In his book, Steve Jobs, Walter Isaacson says that Steve Jobs made several trips to Sony manufacturing plants in Japan to learn little things that mattered.

“Sony had long been acknowledged as the world’s best electronics manufacturer, but in 2002, Sony’s market capitalisation fell below Samsung’s, which had been an obscure memory chip producer not many years ago. By December 2006, Samsung’s market capitalisation was $106 billion, an increase of 400 percent since 2000 and twice that of Sony’s.

Since becoming CEO in 1997, Jong-yong Yun has become famous for turning Samsung Electronics into one of the most profitable companies in the electronics industry. By contrast, Sony’s Chairman Nobuyuki Idei and President Kunitake Ando resigned in 2005 and were succeeded by Howard Stringer and Ryoji Chubachi, respectively.”

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On October 1 2014, JVC and Kenwood merged in a bid to resuscitate the bedridden erstwhile victorious king of Japanese electronics JVC. But the effort did not pay much dividend.

Such gloomy stories are true for Sharp, Panasonic and Fujitsu. South Korean and USA companies have eaten away the Japanese electronics company’s lunch. But what went wrong?

The Japanese companies made huge profits with analogue hatch-back TV technology. The introduction of digital flat panel TVs changed the rules of the game; tightening margins began to squeeze companies such as JVC, Hitachi, Fujitsu, Toshiba, NEC and pioneer.

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Yet South Korean Samsung and LG focused on building high-quality flat TVs and added a few sweeteners in form of alley of features while selling them for competitive prices. To cut a long story short, Samsung trounced the Japanese lot in features and design to emerge as the undoubted leader with gold standard brand.

The Japanese companies failed to pay attention to shifting trends in music and got outmaneuvered by Apple. Music became personal and no longer resided on CD real estate. With the infiltration of the internet people streamed music and no longer burnt and ripped CDs anymore. With enough space for a thousand CD worth of music in one’s pocket on the iPod, who would want a Kenwood HiFi?

The rising value of the Japanese yen made products exported from Japan more expensive abroad and ate away margins at home. A few years ago, the kwacha was at par with the Japanese yen. While the kwacha has steadily fallen, Yen has steadily been skyrocketing.

The Japanese electronics giants, just as good as Microsoft, missed the boat on mobile phones. Panasonic and Sharp were too inward-looking on the Japanese market to have the eyes to look wider overseas. Sony had predicated its success on its joint venture with Ericson and with the smokescreen initial success with basic phones, Sony became blind and, by the time it got its economic sight back, the smartphone ship had anchored safely in South Korea, USA and China.

Most of the Japanese electronics giants are shifting focus to survive. Sony has some footage on PlayStation, digital cameras and film-making equipment for Hollywood and is wedging a serious comeback into smartphone market place. The rest are now turning into agriculture green-house electronics.

The smartphone is everything; your VCR, TV and HiFi. Apple and Samsung are not letting go on this one. The Japanese have now been reduced to suppliers of components for the iPhone electronics which is designed in the US, manufactured in China and the US keeps the profits.

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