The uncomfortable truth about the decline of Japan’s tech giants

7 years ago by in Featured, Technology

The immediate cause for the outstanding fall of Japanese tech companies is not the strong yen, as their executives insist, but bad product strategy, according to Richard Katz, an editorialist with the Wall Street Journal.

The big names of the Japanese electronics industry, with very few exceptions, will score a whooping $17 billion total loss in the current fiscal year, while rating agencies are reducing grades for companies like Sony and Sharp.

The mistake Japanese make is not adapting to the realities of the new century. As countries develop and markets mature, cheap capital and low prices cannot sustain growth anymore. The new strategy has to be production innovation and this can mean two things – to know which products to sell, as well as which not to sell, writes Katz.

Currently, 77 percent of Japan’s electronics production consists of parts and components used by other companies to make final products. But a simple analysis of cost structure for successful products like iPhone, iPad or Android smartphones shows that the largest part of the money does not go to parts suppliers. It goes to product inventors instead.

Japanese firms are competing against Samsung when they should be competing against Apple, Intel and Microsoft, companies who lead thanks to their innovative approach on the business, concludes the editorialist. “Just take a look at how many young Japanese flock to the Apple stores in Tokyo and how few linger in the Sony stores.”