Apple eclipses Japanese electronics giant in solar eclipse

Japanese electronics giants such as Sony, Panasonic , Hitachi and Sharp once dominated the global technology field, and their electronic products can be found in every corner of the world. However, now Apple and Samsung have eclipsed these Japanese giants with their huge success in the consumer electronics field.

The Economist magazine in the UK recently published an article saying that if the struggling Japanese electronics giant wants to recreate its past glory, it needs to not only launch outstanding new technologies and products, but also make breakthroughs in institutional reform. The following is the main content of the article.

Sony in trouble

Sony is going through a mixed period right now. On July 1, the company said goodbye to its PC brand VAIO. Since its launch in 1996, VAIO computers have won a large number of loyal fans, including the late Apple co-founder Steve Jobs, who was extremely impressed by VAIO at its peak and even expressed to Sony his desire to install Apple's Mac operating system in VAIO. For VAIO, after leaving Sony, VAIO has been struggling. Sony announced in February this year that it would sell the business to a Japanese private equity fund. Subsequently, VAIO's market share in Japan plummeted from 10% at the beginning of the year to 2%.

Such poor performance is frustrating for Sony, which still holds a small stake in VAIO. However, Sony has more to worry about than VAIO, as its investors are putting pressure on the company's management to take measures to reverse the company's long-term performance decline. Sony has suffered losses in five of the past six years and is expected to continue to lose money in the fiscal year ending March 2015.

VAIO is the most important of the many businesses that Sony has divested in recent years, and this may just be the beginning of its business restructuring. At the same time, Sony has also spun off its once-glorious but recently loss-making TV business into an independent legal entity. Sony CEO Kazuo Hirai has ruled out the possibility of selling the TV business, which has led many to criticize him for not taking more radical action, but Sony has also admitted that they may still form an alliance with other TV manufacturers.

The collective decline of Japanese electronics giants

Despite years of denying the need for deep change, Japan’s entire consumer electronics industry has been in decline, with global market share in all categories falling (see chart below). In 1982, we published an article describing how “Japan’s electronics giants” would continue to conquer the world with a variety of exciting electronic products, such as camcorders, fax machines and CD players. And they did, at least for a while. But now they are in collective decline, being beaten by competitors including South Korea’s Samsung and the United States’ Apple in the most important consumer electronics field.

Japan's consumer electronics market is highly prosperous, and its per capita electronic product ownership ranks second in the world after the United States. However, even in such a favorable domestic situation, the market share of manufacturers such as Hitachi, Panasonic, Sharp, and Sony has been shrinking again and again. Japanese companies have basically given up the local PC market, and their share in the mobile phone market has also been falling (currently foreign smartphones have a market share of about 20% in Japan). In fact, they have never produced a smartphone product that can shake the market, even though it is currently the most sought-after electronic product. Back then, Sony's Trinitron TV and Walkman portable player once helped Japan create an incredible trade surplus, but now they are facing a huge trade deficit.

However, Eiichi Katayama, an analyst at Bank of America Merrill Lynch in Tokyo, Japan, found a self-consolation reason for the above situation: for most companies, consumer electronics is a business that is difficult for one company to dominate, so the competition in this industry is also very fierce. Now, a strong brand can no longer support the high price of products. Samsung this week expected that its operating profit in the second quarter will decline, which will be the third consecutive quarter of profit shrinkage for the company. The main reason for this phenomenon is the double attack of Xiaomi and Apple. Xiaomi, although it was founded only three years ago, has quickly become the leader in China's low-end mobile phone market with its unique "low-price hunger marketing" method, while the excellent performance of Apple's iPhone has put Samsung under great pressure in the high-end market.

Still, Japanese electronics companies have made many unforgivable mistakes over the past decade. They continue to put hardware first, ignoring fast-growing software and services (such as Apple's iTunes) and failing to grasp changing consumer tastes. Peter Kenevan, a consultant at McKinsey in Tokyo, said Japanese electronics companies were slow to respond in fast-growing emerging markets, which they still see as low-cost manufacturing bases.

Today, Japanese electronics companies are facing a series of difficult decisions, they need to figure out which existing products to abandon and which new products to focus on. Sony's managers have reportedly studied Philips' reform plan many times. Philips has withdrawn from several underperforming business areas through reforms. Last year, it abandoned its TV business and may sell off a large stake in its lighting business in the future.

Panasonic has begun to make major adjustments to its business. Under the leadership of new CEO Kazuhiro Tsuga, Panasonic has abandoned its plasma TV and consumer smartphone businesses. Its latest business development focus is on producing energy-saving residential equipment. In addition, automotive parts have become another high-growth business for Panasonic, including batteries used in electric and hybrid vehicles. Tsuga is also looking for ways to better serve emerging markets in Asia. He recently publicly stated that Panasonic will establish a product research and development center in India, which will be mainly composed of local employees, which is unprecedented in Panasonic's development history.

At the same time, other Japanese companies including Toshiba and Hitachi have also reduced their dependence on consumer electronics business and begun to gradually shift their development focus to heavy industry. These measures will help solve the structural problem of highly overlapping businesses in the Japanese electronics sector. Some electronics giants have even begun to get involved in unexpected new fields such as high-tech agriculture. It is said that companies including Fujitsu, Hitachi, Panasonic and Sharp are currently transforming abandoned factory land and using high-tech greenhouses to grow some vegetables that are sold at higher prices in the Japanese market.

The economic benefits of these changes are already showing. Thanks to the recent depreciation of the yen, Fujitsu, Panasonic and Sharp have all returned to profitability in 2013. Other electronics giants have also seen improved profits, with the exception of Sony and NEC. Sony has promised to return to profitability in the 2015-16 fiscal year, and its smartphone and tablet businesses are now on track, thanks to an important innovation that makes its devices "waterproof". Although it is not yet realistic to regain market share lost to Apple (see the figure below), there are signs that Sony's worst period may be over, which can help Sony resist the proposal of a breakup proposed by American activist investor Daniel Loeb.

Finding new growth points

In the foreseeable future, the majority of revenue and profits of companies such as Panasonic, Sharp and Sony will continue to rely on consumer electronics. Although Kazuhiro Tsuga has adjusted the development focus of Panasonic through a number of restructuring measures, industry insiders believe that he has not yet found a reliable growth point. Although movies, music, television and financial services are all important businesses of Sony, consumer electronics still accounts for 60% of its total revenue.

Lenovo Japan director Roderick Lappin said that if the CEOs of the above-mentioned Japanese companies are leaders who are willing to take risks and have vision, then Japanese electronics companies can seek ways to achieve revival through more measures. Lappin pointed out that the unparalleled technology that Japanese companies have in the field of engineering is still a very obvious advantage. Although this is beyond the needs of ordinary consumers, many of the patents in the hands of these companies will play a huge role in the currently popular wearable technology and Internet of Things fields. Therefore, as long as they can survive this difficult transition period, the future of Japanese electronics companies is still worth looking forward to.

Unfortunately, however, most Japanese companies are trapped in an old-fashioned corporate culture. With the exception of a few people like Kazuhiro Tsuga, the average age of their leaders is as high as 60 years old. Most of them are very cautious and conservative, and years of losses and restructuring have made them dare not bet their future on new areas. It is particularly important to point out that many Japanese companies still place too much emphasis on lifetime employment. In most large Japanese companies, about one-third of regular employees are actually overstaffed, but because Japan's labor laws are not clear, it is difficult for these companies to carry out targeted layoffs.

Prime Minister Shinzo Abe's government reforms could help revitalize Japan's labor market, benefiting the electronics industry more than any other. Once layoffs become easier, Panasonic, Sony and other Japanese companies will have greater financial flexibility and be more able to respond to changing market conditions. Currently, these companies pay very high compensation for voluntary resignations, often equivalent to two to three years' salary for an employee.

Hidemi Moue, president of Japan Industrial Partners, the acquirer of VAIO, pointed out that since many Japanese companies are no longer managed by strong-arm founders, but by professional managers who grew up with lifetime employment, the latter are actually very reluctant to solve the above problems. In short, if Japanese electronics companies want to regain their former glory, it is difficult to rely on a few excellent new products. The most important thing is to make a breakthrough in the reform of the mechanism.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.