Posted on: Saturday, November 3, 2001
New alliances in Japan electronics
By Yuri Kageyama
Associated Press
TOKYO — Japan's once-mighty electronics companies are being humbled by a crushing combination of competition from Asian rivals, sinking semiconductor prices and a worldwide slump in sales.
After decades of building success on "mono zukuri" — or "making things" — with an attention to detail and quality, electronics manufacturers are discovering they have failed to come up quickly enough with new ideas, technologies and services.
All major electronics companies, with the exception of Sony Corp., are forecasting big losses for the fiscal year ending in March. Sony, which has important entertainment divisions, is predicting a modest profit.
No one is suggesting that companies like Matsushita Electric Industrial Co. or Fujitsu Ltd. are near collapse or about to be bought out — at least, not yet.
Matsushita's managing director, Yukio Shohtoku, said he was concerned his company was becoming an easy target for a takeover.
"The threat is not a theory. It is a possibility, although not a probability," he said.
The Japanese are still emphasizing the industriousness, exacting standards and low cost that made "Made in Japan" synonymous with quality for years. But these days, China, South Korea and other Asian manufacturing nations are successfully imitating those standards, often at lower cost.
A global economic slowdown has worsened matters for a country that long has relied on exports to drive profits.
The companies are attempting to ride out the tough times with cost cutting, and experimenting with alliances that unite erstwhile rivals in limited areas but stop short of full-fledged partnerships.
In October, for example, Matsushita set up a venture with Toshiba Corp. to make liquid-crystal displays.
"We can do it alone, but can we make it in time?" Shohtoku said. "We can buy time by alliances."
Matsushita, which makes the Panasonic brand, tied up with NEC Corp. to share technologies in next-generation cell phones earlier this year. In May, it said it will work with Hitachi to develop digital home electronic products, including refrigerators and washing machines.
Other companies are following suit.
Sharp Corp. and Sanyo Electric Co. are working together in consumer electronics research. Sharp is also supplying microwave ovens to Sanyo in Europe, while Sanyo in return supplies refrigerators to Sharp in Southeast Asia.
Fujitsu is setting up a joint venture with Japanese camera maker Minolta Co. to develop color laser printers. It also has an alliance with U.S. networking giant Cisco Systems to offer systems solutions by combining Fujitsu's software and Cisco's network equipment.
Sony Corp. has formed a joint venture in mobile phones with Swedish wireless equipment maker LM Ericsson.
Limited alliances are better than all-out ones that tend to be "clumsy and slow," said Sony spokesman Gerald Cavanagh.
"Speed and mobility are crucial," he said.
Masahiro Ono, analyst with UBS Warburg in Tokyo, foresees more alliances in the works.
"All the electronics companies are really trying to change," Ono said. "And we can't judge yet which ones will survive and which ones won't."
Smaller companies may have an easier time shifting gears to become niche players. Sharp has a reputation in liquid crystal displays. Sanyo leads in digital cameras, and has kept profit falls in check with semiconductors for less sophisticated, analog electric goods.
Giants like Sony and Matsushita will have to prove that size hasn't turned them into dinosaurs.
In a switch from this country's tradition that upholds lifetime employment, the electronics makers have announced job cuts by the thousands.
But none are resorting to mass layoffs. The early retirement and other programs are proving costly and taking their toll on already catastrophic earnings reports.
Matsushita announced a large-scale early retirement program for the first time in it's 80-year history and is planning to cut 8,000 jobs, or 3 percent of its global work force, by March. That effort is costing Matsushita $1.1 billion.
For the fiscal year ending in March 2002, Matsushita is expecting a loss of $2.2 billion, its biggest since its stock market listing in 1971. Sales have plunged for products ranging from mobile phones to computer parts.
Hitachi expects to lose $1.9 billion, Fujitsu $2.5 billion, Toshiba $1.6 billion and NEC Corp. $1.2 billion. Sony Corp. is anticipating a profit of $82 million, or 10 billion yen. That is about 8 percent of what Sony made two years ago, when its profit totaled 121 billion yen.
Fujitsu Senior Executive Vice President Takashi Takaya recently acknowledged the company may have to lower its yearly earnings projections — for the third time.
"The future is that uncertain," he said.
