8 ms·

What happened to Japan's electronic giants?

115 points by davidroberts 13y ago

redcap 13y ago
Article misses the fact that managers rather than creators took over the electronics companies. Losing creativity meant losing an edge.
- joelrunyon 13y ago
  There was an article I read a while back that pointed out that the exact same thing happened with the American Auto industry before things started to go to crap.
  - rmckayfleming 13y ago
    Would you happen to have a link to that? That sounds like an interesting read.
    - jseliger 13y ago
      Try The Reckoning by David Halberstam: http://www.amazon.com/The-Reckoning-David-Halberstam/dp/0688048382 http://www.amazon.com/The-Reckoning-David-Halberstam/dp/0688... .
- marvin 13y ago
  Is there an article somewhere which goes into more detail about this point?
- bitL 13y ago
  I think that's common characteristics in downfall of large companies and nations. Once ambitious managerial types without a viable enthusiastic vision take over, it's a long, hopeless decline; when the innovative types are punished in order to preserve power status quo, it's over.
Egregore 13y ago
May be one reason is that they had a lot of cool only for Japan market devices? It is more difficult to make different devices for different markets, Apple on the other hand made one device for all the markets.
- scholia 13y ago
  Sony Trinitron TV sets, PlayStations etc were cool everywhere. Nikon and Canon cameras still are. It's just that the Japanese specialised in high quality manufacturing, and the market went to China's low-wage manufacturing instead. Foxconn basically uses humans as robots, and this is temporarily cheaper than using real robots -- Japan's speciality.
  - macspoofing 13y ago
    >It's just that the Japanese specialised in high quality manufacturing, and the market went to China's low-wage manufacturing instead. Apple iPhones are largely assembled in China, and nobody would claim they are low quality. Chinese manufacturing isn't low quality, unless that's what you want to pay for. Furthermore, I claim that in the last 10-15 years, the quality of Japanese electronics actually declined.
    - dagw 13y ago
      The quality in the iPhone comes from great design and choice of materials. There is nothing particularly good (or bad) about the quality of its manufacturing. You'll also notice that non of the actually important components like the CPU or the screen come from Chines companies (yet)
      - glhaynes 13y ago
        Not sure this is true. I'm no manufacturing expert, but I've heard a million stories about how intensely involved Apple is in their manufacturers' processes. c.f. how the glass is fitted on iPhone 5s: http://www.idownloadblog.com/2012/09/12/how-the-iphone-5-is-made/ http://www.idownloadblog.com/2012/09/12/how-the-iphone-5-is-...
lmm 13y ago
This makes an amusing contrast with the frequent articles decrying the loss of manufacturing here in the US/UK.
- mindcrime 13y ago
  Interestingly enough, there is talk that manufacturing in the US is rebounding... to the point that some people are referring to it as a boom. The reasons why it's happening are varied, but it's an interesting phenomenon to observe. I'll be interested to see if it holds up over time... For more on this idea, see: http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/ http://www.theatlantic.com/magazine/archive/2012/12/the-inso... http://business.time.com/2013/03/28/is-the-u-s-manufacturing-renaissance-real/ http://business.time.com/2013/03/28/is-the-u-s-manufacturing...
dankoss 13y ago
I worked on a Hitachi based coal plant in college. The Japanese were the originators of high precision engineering, and it shows. TI's OMAP program is going the same route: pursuing long term, more stable business instead of consumer facing chips. I suspect that wages in Korea are much lower, allowing them to manufacture ripped off designs at a much lower price. Sony's problem is that they're an engineering driven company in consumer markets. While they often win the spec game, they aren't vertically integrated enough to give the same consumer experience that Apple can. Ars has covered many of their missteps in depth.
- m_mueller 13y ago
  Actually I think Sony would have been (and in part still would be) perfectly vertically integrated. They were big in content, home electronics and hand helds. In the beginning of the last decade they could have hardly asked for a better position to completely dominate the electronics business, the way Apple/Samsung do now - but it was all for nothing. Instead of integrating everything, they just let their divisions keep doing their own thing until it was too late.
  - ctdonath 13y ago
    They tried to "vertically integrate". Really hard. Thing is, they hung the hardware on MemoryStick and the software on ATRAC. Oops.
- eatmyshorts 13y ago
  I think you'll find one person behind the Japanese focus on quality--and thus their expertise in "high precision engineering". That person was W Edwards Deming. Deming was involved in the US Army's post-WWII rebuilding of Japan. Specifically, he was a statistician hired to help with Japan's census. His focus on quality control was revolutionary at the time, and his work became adopted throughout corporate Japan. He is seen as the father of Total Quality Management. He laid the foundations for decades of Japanese excellence in quality control in manufacturing and industry. The problem, of course, is that the rest of the world is now well versed on TQM, and has adopted TQM principles. This is why the average car lasts 100s of thousands of miles today, when such quality was unheard of in the 1960s. Of course, all of the other aspects mentioned have contributed--rising wages, managers replacing engineers, etc etc. But the root cause of all of this is that their competitive advantage that results from a focus on quality is gone now.
eloisant 13y ago
That's simple: they've always been very good at hardware but not that good at software. It was fine in a time where software was just a minor part of electronics, but today the software is the most important part, and the hardware is just here to make sure the software can run flawlessly.
- scholia 13y ago
  If the Japanese are bad at software, it's somewhat odd that Japanese programmers wrote a huge proportion of the world's greatest video games.... They're also world leaders in software development for robotics. Japan also developed 3G (UMTS), which is why Japanese phones no longer dominate the Japanese market.
  - ippisl 13y ago
    Maybe developing games and robots , in past didn't require good english, but today, in many industries you have to have good english in order to develop software since a lot of code will come from other places around the globe(whether it's open source, or commercial libraries). The japanese are pretty weak in english in general.
  - adventureloop 13y ago
    It is true that Japanese studio created some of the greatest games of all time. But I have also heard reports that every game was rewritten from scratch. The DIY concept was entirely alien. Source: 84 Play Podcast interview with Gregg Tavares (I think, I cant relisten to the podcast now). Linked if interested http://8-4.jp/blog/?p=1423&lang=en http://8-4.jp/blog/?p=1423&lang=en
    - shrikant 13y ago
      DIY? I believe you mean DRY :)
    - vadman 13y ago
      I remember reading some article about Japanese gamedev years ago that said the same thing. No OO, no standards, lots of repetition, &c.
lifeisstillgood 13y ago
I would suggest that a title change will say it all: What happened to Japan's electrical giants? Hitachi's boss says it in the article "Digital technology changed everything," he says. "In the television industry it means that just one chip is now needed to produce a large and high quality TV picture. So now everybody can do it." What they did was electrical engineering - but apart from washing machines, everything consumer is on a chip. Hitachi has seen this and run, all the others should be following suit, or trading on their names as brands for Android phones.
- makomk 13y ago
  Of course, Hitachi actually had a semiconductor design and manufacturing subsidiary, and their H8 microcontrollers and SuperH CPUs were quite popular at one point. I think they've sold all that off now though.
  - lifeisstillgood 13y ago
    Well, the chips dont make the money, the software makes the money. Its kind of like why car manufacturers made more money than the car parts suppliers...
- Aardwolf 13y ago
  A vacuum cleaner on a chip? A microwave oven on a chip? A large LCD screen on a chip? I don't really get what you mean by "everything consumer is on a chip". Making LCD screens is quite hardware-y and I thought quite difficult to do well too.
  - raverbashing 13y ago
    More or less this Let's go back to the 80's. Electronic products had to be done with lots of components. There were chips, but they did much less than what they do today. Also, more mechanical parts (think VCR, Camcorder, etc) So the real work was doing more with less components and good quality. Today, with better chip technology and 'solidization' of technologies. (magnetic tape to flash memory, crts to lcds) today you can realistically have an LCD tv with only a couple of chips (apart from the power source, lcd panel and some other components like speakers and maybe the tuning part). There's nothing much to tweak. There's software, but that's increasingly commoditized as well. And the japanese apparently can't innovate software-wise.
InclinedPlane 13y ago
In the '70s and '80s Japan was hungry, they wanted to leap up to being a world-class country and a high-tech, first world economy. So they took risks and let innovation rule. Then when the high-tech sector got big they tightened up and reined in risk and creativity, causing them to miss out on several key market turnovers in tech. Look at the biggest smartphone manufacturers: samsung, apple, huawei, htc, zte, LG. Mostly Chinese, Korean, and US companies. Only recently has Japan seriously entered the touchscreen smartphone market competitively. Maybe if Japanese company's get hungry enough to innovate they'll make a comeback.
speeder 13y ago
We had some Brazillian electronics company also flopping last 10 years. Reasons I indentified: Losing creators and get swamped by middle-manager types... Too bad one of them don't even had a choice (the founder died, and this resulted into them switching from the most inventive electronic toys I ever saw, to low quality cheap DVD players, Karaoke machines and cheap Guitar Hero rippoffs using their Karaoke tech) Second: Neglecting software... This one is obvious that when I applied to those companies as programmer, they wanted to pay me less than my rent was, absurdly ridiculous (and they all have a very high programmer turnover rate) Third: Excessive outsourcing and subsequent problems in managing quality. This was particularly striking with one company, that fixed the first two issues and licensed from China some products (developed in China, and not rip-offs) that would have high demand here. Indeed, that plan ALMOST worked, their products sold so much they frequently had online store freezing by excessive visits, and their products were always out of stock... But then reports showed up of exploding chargers, screens with lots of dead pixels, and so on... This went for about 6 months, with the demand still outstripping the negative reports, but eventually it became clear they could not find a outsourcer to do it properly, and they had divested themselves of their factories many years ago, and had no know how anymore in manufacturing, and did not even had sufficient knowledge to visit the outsourcers factory and force them to fix their process. They are bankrupt know, to much unhappiness of the costumers attracted in their short lived renaissance.
- da02 13y ago
  Pardon the tangent, but did you ever write/blog about those "inventive electronic toys"? I am not speaking as a producer, but as a consumer and over-grown child. Were they like robotic/Legos/construction kits like they had back in the 80s/early-90s? Or something completely different?
Isamu 13y ago
I was expecting at least a mention of Mecha-Godzilla. What happened to him was the old Godzilla. Sony was a really big inspiration to Steve Jobs, or at least Akio Morita was. It has been very surprising to me to see Sony slip repeatedly. I think they got caught up in just packing in features without a real vision to unify what they were trying to accomplish.
- Poyeyo 13y ago
  Sony is being killed by Sony's content division, that is, the movie studio and the music label.
davidroberts 13y ago
I think they are failing because sometime in the mid-Nineties, in the effort to compete with lean and hungry overseas companies, they lost their legendary reputation for quality and customer service, as they tried to respond to changing circumstances. A couple of examples of my own: Around 1996, I bought a cassette recorder made by Aiwa, which had been a fairly upscale electronics brand. It looked nice from the outside, but when I examined it closer after buying it, I realized it was a fairly crude, generic cassette recorder of the time, made in China, probably the generic output from a factory there that Aiwa had slapped their name onto. It failed in less than a month. I brought it to the store for a replacement and that one failed too within thirty days, exactly the same way the first one did. Obviously, Aiwa had not done extensive testing on this model, and I think probably didn't even design or supervise its manufacture. In the early 2000s, I bought a Sony Palm OS PDA. It was very advanced and had great features that I loved. But it failed in two weeks due to bad connection to the lamp that lit the LED display. After a few minutes' search on the Internet, I saw this was a well-known problem with this device, caused by a design flaw. I took it back to the store, and got a replacement that failed exactly the same way in two weeks. The store wouldn't give me another, so I had to rely on Sony's warranty service. It was my worst-ever warranty experience. After a long conversation with customer service reps in India, I was able to convince them it was actually failing. They sent me a box to return it in. It took almost a month to come back, only to fail with the same problem about three months later. I went through the whole process again, waited another month. This time the repaired (or replaced) device came back rattling around in a box with no packing material. It too failed, several days after the one-year warranty expired. I think the decline of the Japaneses electronic giants has been caused by a combination of several things. Japanese technology companies built their reputations during the late Sixties and Seventies, at the start of the Japanese economic boom, when they had a highly skilled workforce willing to work at relatively low wages, compared to the US or Europe. They had already sharpened their quality and innovative abilities in the intense domestic Japanese market, which was extremely competitive and where the consumers were very picky about quality. That market was protected, so there was almost no competition from overseas. When they moved into Western markets, they were the young, scrappy underdog taking on dinosaur companies like RCA and Phillips, that could not respond fast enough to compete effectively against them. They were also aided by the low value of the yen relative to the dollar, which made their products a very good value. So all of these things have changed. Complaints of unfair trade eventually forced Japan to open their domestic market to overseas competition. As the article pointed out, now Japanese companies are the dinosaurs in their domestic market, competing against Apple and Samsung. Meanwhile, the yen is very high against foreign currencies, which hurts them badly in export markets. The Japanese labor market has also changed. Younger Japanese are much less willing to work with the dedication their parents and grandparents had. Wages have gone up, and are equal to or higher than those in the US and Europe, and like those countries, they have tried to cut costs by shifting manufacturing overseas, which has resulted in a decline in quality. Also, the Japanese population is declining, with fewer and fewer young workers, and those coming into the job market have been conditioned to expect comfortable, high-paying, lifetime office jobs, not manufacturing jobs. Meanwhile, the inefficiencies of the lifetime employment system in Japanese companies have made it very difficult to adapt to changing circumstances by laying off workers, even as that system is starting to break down. It's like a perfect storm of bad news for Japanese companies, but in many ways it is very similar to what happened to electronics giants in the US thirty years earlier as they tried to defend against Japanese competition and eventually failed.
ropz 13y ago
On a related but tangential theme, I once started an argument by claiming that Japanese culture does not support the emergence of strong individuals. Perhaps, in electronics as in software, it really does take someone with a huge ego to send a product back to the development labs because 'the black is not black enough'.
josephlord 13y ago
There is some truth in this article but it misses some of the really key factors. 1) Value of the Yen. The Yen is seen as a safe haven and has been at almost ridiculous levels (considering trade balances and government debt) at least since late 2008. This is crippling exports (and/or profitability) in these price sensitive markets (TV's, computers, phones) as even though much production is abroad they still have massive cost bases in Japan. 2) Development of Korea. LG and especially Samsung took the place of the aggressive upstarts driving down prices and then building up the quality as Japan once did to the West in markets such as cars. It will be interesting to see what China's development does to Korea in 15-20 years. So far the aggressive pricing from Korea has kept Chinese TV brands from prominence but that may not last. 3) As Japan prospered and incomes rose it became uneconomic to manufacture commodity items there. Outsourcing and offshoring production damages the feedback and development loop between production and design that enables efficient optimum design of products. Also they narrowed the parts of the supply chain that they supplied to focus on the high value ones that could still be profitable but that costs control and foresight into important developing areas. e.g. Samsung could develop LCD panels in exact form factors to fit their devices and to use them as structural elements in TVs getting a jump start on Sony. (Sharp had[has?] their own panels but the quality wasn't uniformly high and they were overly dependent on their home TV market anyway). 4) There is very little profit in many electronics items. TVs especially are not a source of profits (maybe Samsung makes some but it is hard to tell from their annual reports). Aggressive and falling prices, unstable panel supplies and the fact egos and ecosystems are on the line means that the once stable profit source of CRT TVs has been replaced by an LCD bloodbath. Even in mobile phones only Apple and Samsung are really making money (along with a number of component suppliers getting their slices). [Former Sony employee.]
- wsc981 13y ago
  I think it's also an issue that many Asian companies haven't figured out how to add value with software the way a company like Apple does. Apple can ask a big premium on their tablet and phone devices based on the exclusivity and capabilities of iOS. Certainly lots of innovations could still be achieved in (e.g.) the television markets by creating great software for these products. We still don't have really "smart" television sets. This is the reason why I think the rumoured Apple television set will be a big hit with very nice profits when it finally arrives. The key is to differentiate with the competition and if you can't differentiate on a hardware level, then you have to do it on a software level.
continuations 13y ago
Japan's electronic giants fell because there's no longer an electronic industry. The computer industry has "annexed" the electronics industry and the Japanese companies were never good at computers.
mikecane 13y ago
Minimal Mac just ran a picture yesterday that does indeed say it all: http://minimalmac.com/post/48088436702/yep-pretty-much-sums-it-up-via-w-cie http://minimalmac.com/post/48088436702/yep-pretty-much-sums-... BTW, I kept looking at the first picture and wondering how many people were employed making all those devices versus those now making the components for the iPhone.
programminggeek 13y ago
Um, maybe they are failing because modern electronics are more about software than hardware. If devices are becoming very small PC's with ARM processors, then of course software companies like Apple, Google, and Microsoft will do well. Companies like Sony have hardware DNA, not software DNA.
pornel 13y ago
Interesting tidbit in the article is that majority of Sony's profit comes from their life insurance business: http://www.splatf.com/2011/11/sony-profits/ http://www.splatf.com/2011/11/sony-profits/
cmsimike 13y ago
Sony.. just ugh. I couldn't tell you how big of a Sony fan I was - TVs, cd players, PS 1-3. Then they removed my ability to run Linux on my PS3. They stopped caring about giving the PS3 any new functionality that wasn't for plus members. Blu-rays that I bought stopped working in that system, or took forever to load because the blu-rays started downloading massive new commercials to play for me before the movie started. That was the breaking point for me. What happened to Japan's electronic giants? I can't speak for all of them but Sony started blatantly chasing money. I get that companies exist to make money but, for crying out loud, don't make it so obvious that you're only out for money.
- josephlord 13y ago
  > What happened to Japan's electronic giants? I can't speak for all of them but Sony started blatantly chasing money. I get that companies exist to make money but, for crying out loud, don't make it so obvious that you're only out for money. Have you seen the losses that Sony has made over the past decade? They are pretty desperate and need to chase money. It isn't like they have massive margins. They main problem is that they are amateurs at chasing money compared to companies like MS.
VLM 13y ago
A conflicting opinion: The market used to be narrow where being Japanese made actually mattered. Now flood that market with absolute cheap garbage from China and it bifurcates into mostly purchasing cheap garbage and "everything else is better but costs twice as much and it doesn't matter who makes it as long as its not China". What I'm getting at is the fight shifted from Japan vs the world to China vs the world.
- r00fus 13y ago
  All my nail clippers are japanese make. They're truly amazing compared to the crap that floods the aisles of your average US retail store.
DanBC 13y ago
Japan suffered economic slump. Where people used to dump old electronics to buy new versions (there's a Japanese word to describe the perfectly good trash that people used to collect to furnish their homes) they had to stop because they just couldn't afford to do that any longer.
ekianjo 13y ago
"Mr Nakanishi's strategy is working. Hitachi is back in profit. Hitachi trains are the front-runner in the competition to replace all of the UK's fleet of inter-city high-speed trains. " Mouhahha. Strategy is a long term thing. You can't the effects just in a couple of years. What a joke of an article.
gcb0 13y ago
It's the same economic shift we see since industrial revolution. Nobody here remembers, but one Italy was the cheapest labor. Everyone produced cheep stuff there. Then some companies started to produce quality product (and win races with what was cheap cars) and to be proud of made in Italy (which was a bad thing before). And when Italian design became expensive, markets moved on. I think there was another country in this step, but let's say cheap labor is now in Japan. When it started, only college students would buy Japanese cars (death traps) and Japanese stuff was deemed cheap. Come the same cycle. Companies start to show pride and produce quality stuff. Now made in Japan is expensive. Market moves on to China... Kia is now the car of the new rich with bad taste. But this will change soon (they are even trying to win prestigious rally in Africa) and soon Chinese products are going to be expensive. And probably some Latin or African country will be the next cheap labor.
- rdouble 13y ago
  Kia is from Korea.
  - vetinari 13y ago
    Yup, Kia/Hyundai are from Korea, and the cars sold in EU are also made in EU.
  - gcb0 13y ago
    You are correct. I think Korea is the country i couldn't remember before :) And it's following the pattern alright. Kia, Hyundai, lg. All companies that started with race-to-the-bottom products that are now trying to be market leaders
- geon 13y ago
  > Kia is now the car of the new rich with bad taste. Perhaps it is. I wouldn't know. Here in sweden, Kia is kind of popular (the Sorento SUV has a large market share), and has a reputation as being good quality to a reasonable price.
yekko 13y ago
It's simple, they didn't let their developers run free and are paid too little. You have to pay the creators of wealth in order to get wealth in return.
anizan 13y ago
Sony has been plagued with inability to deal with technology which disrupts their business model in any way. Network walkman which didn't support mp3 on purpose(would cannibalize media division) was so technologically stupid and ever since then they have lost the plot
adregan 13y ago
Though, Abe, the current Prime Minister of Japan a very conservative fellow, he surprised (at least) me the other day by announcing that he's interested in creating a culture of entrepreneurs and startups. The most shocking quote in a recent piece in the WSJ[1] might be Abe, referring to Rakuten.com's Mikitani, saying "I ask Mr. Mikitani to not be afraid of being labeled a trouble maker and to speak his mind to his heart's content." You really can stir up some trouble in Japan by suggesting changes to the status quo (something foreigners do with regularity), so it's very interesting to see a guy like Abe say this. Maybe I misjudged the guy. I think Japan needs to move away from the big electronics companies and focus on creating an environment more conducive to creating young interesting companies. 1: http://online.wsj.com/article/SB10001424127887324345804578424333742053290.html http://online.wsj.com/article/SB1000142412788732434580457842...
dharma1 13y ago
Often wondered this too. Japanese hardware is still good, but difficult to compete on price compared to Korean/Chinese. They have great developers, and have had for a long time, but it feels like the corporate structures themselves are too rigid to allow innovation to surface. You know these companies are doing something wrong when hobbyists have to reverse-engineer their firmware to get the functionality they want and need (I'm looking at you Canon and Panasonic). Sony is not much better, the user interfaces of their hardware feel 10 years old and the recently opened "app store" for their cameras is a joke, with no SDK or 3rd party apps available. As they focus away from TV's to cameras and sensors, that's something they should definitely fix if they want to succeed. The best thing these consumer electronics companies could do is open source parts of the firmware/software and engage more with consumers who are taking a more active role in developing products these days.

115 points by davidroberts 13y ago

Article misses the fact that managers rather than creators took over the electronics companies. Losing creativity meant losing an edge.

joelrunyon 13y ago
There was an article I read a while back that pointed out that the exact same thing happened with the American Auto industry before things started to go to crap.
- rmckayfleming 13y ago
  Would you happen to have a link to that? That sounds like an interesting read.
  - jseliger 13y ago
    Try The Reckoning by David Halberstam: http://www.amazon.com/The-Reckoning-David-Halberstam/dp/0688048382 http://www.amazon.com/The-Reckoning-David-Halberstam/dp/0688... .
marvin 13y ago
Is there an article somewhere which goes into more detail about this point?
bitL 13y ago
I think that's common characteristics in downfall of large companies and nations. Once ambitious managerial types without a viable enthusiastic vision take over, it's a long, hopeless decline; when the innovative types are punished in order to preserve power status quo, it's over.

Egregore 13y ago

May be one reason is that they had a lot of cool only for Japan market devices? It is more difficult to make different devices for different markets, Apple on the other hand made one device for all the markets.

scholia 13y ago
Sony Trinitron TV sets, PlayStations etc were cool everywhere. Nikon and Canon cameras still are. It's just that the Japanese specialised in high quality manufacturing, and the market went to China's low-wage manufacturing instead. Foxconn basically uses humans as robots, and this is temporarily cheaper than using real robots -- Japan's speciality.
- macspoofing 13y ago
  >It's just that the Japanese specialised in high quality manufacturing, and the market went to China's low-wage manufacturing instead. Apple iPhones are largely assembled in China, and nobody would claim they are low quality. Chinese manufacturing isn't low quality, unless that's what you want to pay for. Furthermore, I claim that in the last 10-15 years, the quality of Japanese electronics actually declined.
  - dagw 13y ago
    The quality in the iPhone comes from great design and choice of materials. There is nothing particularly good (or bad) about the quality of its manufacturing. You'll also notice that non of the actually important components like the CPU or the screen come from Chines companies (yet)
    - glhaynes 13y ago
      Not sure this is true. I'm no manufacturing expert, but I've heard a million stories about how intensely involved Apple is in their manufacturers' processes. c.f. how the glass is fitted on iPhone 5s: http://www.idownloadblog.com/2012/09/12/how-the-iphone-5-is-made/ http://www.idownloadblog.com/2012/09/12/how-the-iphone-5-is-...

lmm 13y ago

This makes an amusing contrast with the frequent articles decrying the loss of manufacturing here in the US/UK.

mindcrime 13y ago
Interestingly enough, there is talk that manufacturing in the US is rebounding... to the point that some people are referring to it as a boom. The reasons why it's happening are varied, but it's an interesting phenomenon to observe. I'll be interested to see if it holds up over time... For more on this idea, see: http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/ http://www.theatlantic.com/magazine/archive/2012/12/the-inso... http://business.time.com/2013/03/28/is-the-u-s-manufacturing-renaissance-real/ http://business.time.com/2013/03/28/is-the-u-s-manufacturing...

dankoss 13y ago

I worked on a Hitachi based coal plant in college. The Japanese were the originators of high precision engineering, and it shows. TI's OMAP program is going the same route: pursuing long term, more stable business instead of consumer facing chips. I suspect that wages in Korea are much lower, allowing them to manufacture ripped off designs at a much lower price. Sony's problem is that they're an engineering driven company in consumer markets. While they often win the spec game, they aren't vertically integrated enough to give the same consumer experience that Apple can. Ars has covered many of their missteps in depth.

m_mueller 13y ago
Actually I think Sony would have been (and in part still would be) perfectly vertically integrated. They were big in content, home electronics and hand helds. In the beginning of the last decade they could have hardly asked for a better position to completely dominate the electronics business, the way Apple/Samsung do now - but it was all for nothing. Instead of integrating everything, they just let their divisions keep doing their own thing until it was too late.
- ctdonath 13y ago
  They tried to "vertically integrate". Really hard. Thing is, they hung the hardware on MemoryStick and the software on ATRAC. Oops.
eatmyshorts 13y ago
I think you'll find one person behind the Japanese focus on quality--and thus their expertise in "high precision engineering". That person was W Edwards Deming. Deming was involved in the US Army's post-WWII rebuilding of Japan. Specifically, he was a statistician hired to help with Japan's census. His focus on quality control was revolutionary at the time, and his work became adopted throughout corporate Japan. He is seen as the father of Total Quality Management. He laid the foundations for decades of Japanese excellence in quality control in manufacturing and industry. The problem, of course, is that the rest of the world is now well versed on TQM, and has adopted TQM principles. This is why the average car lasts 100s of thousands of miles today, when such quality was unheard of in the 1960s. Of course, all of the other aspects mentioned have contributed--rising wages, managers replacing engineers, etc etc. But the root cause of all of this is that their competitive advantage that results from a focus on quality is gone now.

eloisant 13y ago

That's simple: they've always been very good at hardware but not that good at software. It was fine in a time where software was just a minor part of electronics, but today the software is the most important part, and the hardware is just here to make sure the software can run flawlessly.

scholia 13y ago
If the Japanese are bad at software, it's somewhat odd that Japanese programmers wrote a huge proportion of the world's greatest video games.... They're also world leaders in software development for robotics. Japan also developed 3G (UMTS), which is why Japanese phones no longer dominate the Japanese market.
- ippisl 13y ago
  Maybe developing games and robots , in past didn't require good english, but today, in many industries you have to have good english in order to develop software since a lot of code will come from other places around the globe(whether it's open source, or commercial libraries). The japanese are pretty weak in english in general.
- adventureloop 13y ago
  It is true that Japanese studio created some of the greatest games of all time. But I have also heard reports that every game was rewritten from scratch. The DIY concept was entirely alien. Source: 84 Play Podcast interview with Gregg Tavares (I think, I cant relisten to the podcast now). Linked if interested http://8-4.jp/blog/?p=1423&lang=en http://8-4.jp/blog/?p=1423&lang=en
  - shrikant 13y ago
    DIY? I believe you mean DRY :)
  - vadman 13y ago
    I remember reading some article about Japanese gamedev years ago that said the same thing. No OO, no standards, lots of repetition, &c.

lifeisstillgood 13y ago

I would suggest that a title change will say it all: What happened to Japan's electrical giants? Hitachi's boss says it in the article "Digital technology changed everything," he says. "In the television industry it means that just one chip is now needed to produce a large and high quality TV picture. So now everybody can do it." What they did was electrical engineering - but apart from washing machines, everything consumer is on a chip. Hitachi has seen this and run, all the others should be following suit, or trading on their names as brands for Android phones.

makomk 13y ago
Of course, Hitachi actually had a semiconductor design and manufacturing subsidiary, and their H8 microcontrollers and SuperH CPUs were quite popular at one point. I think they've sold all that off now though.
- lifeisstillgood 13y ago
  Well, the chips dont make the money, the software makes the money. Its kind of like why car manufacturers made more money than the car parts suppliers...
Aardwolf 13y ago
A vacuum cleaner on a chip? A microwave oven on a chip? A large LCD screen on a chip? I don't really get what you mean by "everything consumer is on a chip". Making LCD screens is quite hardware-y and I thought quite difficult to do well too.
- raverbashing 13y ago
  More or less this Let's go back to the 80's. Electronic products had to be done with lots of components. There were chips, but they did much less than what they do today. Also, more mechanical parts (think VCR, Camcorder, etc) So the real work was doing more with less components and good quality. Today, with better chip technology and 'solidization' of technologies. (magnetic tape to flash memory, crts to lcds) today you can realistically have an LCD tv with only a couple of chips (apart from the power source, lcd panel and some other components like speakers and maybe the tuning part). There's nothing much to tweak. There's software, but that's increasingly commoditized as well. And the japanese apparently can't innovate software-wise.

InclinedPlane 13y ago

In the '70s and '80s Japan was hungry, they wanted to leap up to being a world-class country and a high-tech, first world economy. So they took risks and let innovation rule. Then when the high-tech sector got big they tightened up and reined in risk and creativity, causing them to miss out on several key market turnovers in tech. Look at the biggest smartphone manufacturers: samsung, apple, huawei, htc, zte, LG. Mostly Chinese, Korean, and US companies. Only recently has Japan seriously entered the touchscreen smartphone market competitively. Maybe if Japanese company's get hungry enough to innovate they'll make a comeback.

speeder 13y ago

We had some Brazillian electronics company also flopping last 10 years. Reasons I indentified: Losing creators and get swamped by middle-manager types... Too bad one of them don't even had a choice (the founder died, and this resulted into them switching from the most inventive electronic toys I ever saw, to low quality cheap DVD players, Karaoke machines and cheap Guitar Hero rippoffs using their Karaoke tech) Second: Neglecting software... This one is obvious that when I applied to those companies as programmer, they wanted to pay me less than my rent was, absurdly ridiculous (and they all have a very high programmer turnover rate) Third: Excessive outsourcing and subsequent problems in managing quality. This was particularly striking with one company, that fixed the first two issues and licensed from China some products (developed in China, and not rip-offs) that would have high demand here. Indeed, that plan ALMOST worked, their products sold so much they frequently had online store freezing by excessive visits, and their products were always out of stock... But then reports showed up of exploding chargers, screens with lots of dead pixels, and so on... This went for about 6 months, with the demand still outstripping the negative reports, but eventually it became clear they could not find a outsourcer to do it properly, and they had divested themselves of their factories many years ago, and had no know how anymore in manufacturing, and did not even had sufficient knowledge to visit the outsourcers factory and force them to fix their process. They are bankrupt know, to much unhappiness of the costumers attracted in their short lived renaissance.

da02 13y ago
Pardon the tangent, but did you ever write/blog about those "inventive electronic toys"? I am not speaking as a producer, but as a consumer and over-grown child. Were they like robotic/Legos/construction kits like they had back in the 80s/early-90s? Or something completely different?

Isamu 13y ago

I was expecting at least a mention of Mecha-Godzilla. What happened to him was the old Godzilla. Sony was a really big inspiration to Steve Jobs, or at least Akio Morita was. It has been very surprising to me to see Sony slip repeatedly. I think they got caught up in just packing in features without a real vision to unify what they were trying to accomplish.

Poyeyo 13y ago
Sony is being killed by Sony's content division, that is, the movie studio and the music label.

davidroberts 13y ago

I think they are failing because sometime in the mid-Nineties, in the effort to compete with lean and hungry overseas companies, they lost their legendary reputation for quality and customer service, as they tried to respond to changing circumstances. A couple of examples of my own: Around 1996, I bought a cassette recorder made by Aiwa, which had been a fairly upscale electronics brand. It looked nice from the outside, but when I examined it closer after buying it, I realized it was a fairly crude, generic cassette recorder of the time, made in China, probably the generic output from a factory there that Aiwa had slapped their name onto. It failed in less than a month. I brought it to the store for a replacement and that one failed too within thirty days, exactly the same way the first one did. Obviously, Aiwa had not done extensive testing on this model, and I think probably didn't even design or supervise its manufacture. In the early 2000s, I bought a Sony Palm OS PDA. It was very advanced and had great features that I loved. But it failed in two weeks due to bad connection to the lamp that lit the LED display. After a few minutes' search on the Internet, I saw this was a well-known problem with this device, caused by a design flaw. I took it back to the store, and got a replacement that failed exactly the same way in two weeks. The store wouldn't give me another, so I had to rely on Sony's warranty service. It was my worst-ever warranty experience. After a long conversation with customer service reps in India, I was able to convince them it was actually failing. They sent me a box to return it in. It took almost a month to come back, only to fail with the same problem about three months later. I went through the whole process again, waited another month. This time the repaired (or replaced) device came back rattling around in a box with no packing material. It too failed, several days after the one-year warranty expired. I think the decline of the Japaneses electronic giants has been caused by a combination of several things. Japanese technology companies built their reputations during the late Sixties and Seventies, at the start of the Japanese economic boom, when they had a highly skilled workforce willing to work at relatively low wages, compared to the US or Europe. They had already sharpened their quality and innovative abilities in the intense domestic Japanese market, which was extremely competitive and where the consumers were very picky about quality. That market was protected, so there was almost no competition from overseas. When they moved into Western markets, they were the young, scrappy underdog taking on dinosaur companies like RCA and Phillips, that could not respond fast enough to compete effectively against them. They were also aided by the low value of the yen relative to the dollar, which made their products a very good value. So all of these things have changed. Complaints of unfair trade eventually forced Japan to open their domestic market to overseas competition. As the article pointed out, now Japanese companies are the dinosaurs in their domestic market, competing against Apple and Samsung. Meanwhile, the yen is very high against foreign currencies, which hurts them badly in export markets. The Japanese labor market has also changed. Younger Japanese are much less willing to work with the dedication their parents and grandparents had. Wages have gone up, and are equal to or higher than those in the US and Europe, and like those countries, they have tried to cut costs by shifting manufacturing overseas, which has resulted in a decline in quality. Also, the Japanese population is declining, with fewer and fewer young workers, and those coming into the job market have been conditioned to expect comfortable, high-paying, lifetime office jobs, not manufacturing jobs. Meanwhile, the inefficiencies of the lifetime employment system in Japanese companies have made it very difficult to adapt to changing circumstances by laying off workers, even as that system is starting to break down. It's like a perfect storm of bad news for Japanese companies, but in many ways it is very similar to what happened to electronics giants in the US thirty years earlier as they tried to defend against Japanese competition and eventually failed.

ropz 13y ago

On a related but tangential theme, I once started an argument by claiming that Japanese culture does not support the emergence of strong individuals. Perhaps, in electronics as in software, it really does take someone with a huge ego to send a product back to the development labs because 'the black is not black enough'.

josephlord 13y ago

There is some truth in this article but it misses some of the really key factors. 1) Value of the Yen. The Yen is seen as a safe haven and has been at almost ridiculous levels (considering trade balances and government debt) at least since late 2008. This is crippling exports (and/or profitability) in these price sensitive markets (TV's, computers, phones) as even though much production is abroad they still have massive cost bases in Japan. 2) Development of Korea. LG and especially Samsung took the place of the aggressive upstarts driving down prices and then building up the quality as Japan once did to the West in markets such as cars. It will be interesting to see what China's development does to Korea in 15-20 years. So far the aggressive pricing from Korea has kept Chinese TV brands from prominence but that may not last. 3) As Japan prospered and incomes rose it became uneconomic to manufacture commodity items there. Outsourcing and offshoring production damages the feedback and development loop between production and design that enables efficient optimum design of products. Also they narrowed the parts of the supply chain that they supplied to focus on the high value ones that could still be profitable but that costs control and foresight into important developing areas. e.g. Samsung could develop LCD panels in exact form factors to fit their devices and to use them as structural elements in TVs getting a jump start on Sony. (Sharp had[has?] their own panels but the quality wasn't uniformly high and they were overly dependent on their home TV market anyway). 4) There is very little profit in many electronics items. TVs especially are not a source of profits (maybe Samsung makes some but it is hard to tell from their annual reports). Aggressive and falling prices, unstable panel supplies and the fact egos and ecosystems are on the line means that the once stable profit source of CRT TVs has been replaced by an LCD bloodbath. Even in mobile phones only Apple and Samsung are really making money (along with a number of component suppliers getting their slices). [Former Sony employee.]

wsc981 13y ago
I think it's also an issue that many Asian companies haven't figured out how to add value with software the way a company like Apple does. Apple can ask a big premium on their tablet and phone devices based on the exclusivity and capabilities of iOS. Certainly lots of innovations could still be achieved in (e.g.) the television markets by creating great software for these products. We still don't have really "smart" television sets. This is the reason why I think the rumoured Apple television set will be a big hit with very nice profits when it finally arrives. The key is to differentiate with the competition and if you can't differentiate on a hardware level, then you have to do it on a software level.

continuations 13y ago

Japan's electronic giants fell because there's no longer an electronic industry. The computer industry has "annexed" the electronics industry and the Japanese companies were never good at computers.

mikecane 13y ago

Minimal Mac just ran a picture yesterday that does indeed say it all: http://minimalmac.com/post/48088436702/yep-pretty-much-sums-it-up-via-w-cie http://minimalmac.com/post/48088436702/yep-pretty-much-sums-... BTW, I kept looking at the first picture and wondering how many people were employed making all those devices versus those now making the components for the iPhone.

programminggeek 13y ago

Um, maybe they are failing because modern electronics are more about software than hardware. If devices are becoming very small PC's with ARM processors, then of course software companies like Apple, Google, and Microsoft will do well. Companies like Sony have hardware DNA, not software DNA.

pornel 13y ago

Interesting tidbit in the article is that majority of Sony's profit comes from their life insurance business: http://www.splatf.com/2011/11/sony-profits/ http://www.splatf.com/2011/11/sony-profits/

cmsimike 13y ago

Sony.. just ugh. I couldn't tell you how big of a Sony fan I was - TVs, cd players, PS 1-3. Then they removed my ability to run Linux on my PS3. They stopped caring about giving the PS3 any new functionality that wasn't for plus members. Blu-rays that I bought stopped working in that system, or took forever to load because the blu-rays started downloading massive new commercials to play for me before the movie started. That was the breaking point for me. What happened to Japan's electronic giants? I can't speak for all of them but Sony started blatantly chasing money. I get that companies exist to make money but, for crying out loud, don't make it so obvious that you're only out for money.

josephlord 13y ago
> What happened to Japan's electronic giants? I can't speak for all of them but Sony started blatantly chasing money. I get that companies exist to make money but, for crying out loud, don't make it so obvious that you're only out for money. Have you seen the losses that Sony has made over the past decade? They are pretty desperate and need to chase money. It isn't like they have massive margins. They main problem is that they are amateurs at chasing money compared to companies like MS.

VLM 13y ago

A conflicting opinion: The market used to be narrow where being Japanese made actually mattered. Now flood that market with absolute cheap garbage from China and it bifurcates into mostly purchasing cheap garbage and "everything else is better but costs twice as much and it doesn't matter who makes it as long as its not China". What I'm getting at is the fight shifted from Japan vs the world to China vs the world.

r00fus 13y ago
All my nail clippers are japanese make. They're truly amazing compared to the crap that floods the aisles of your average US retail store.

DanBC 13y ago

Japan suffered economic slump. Where people used to dump old electronics to buy new versions (there's a Japanese word to describe the perfectly good trash that people used to collect to furnish their homes) they had to stop because they just couldn't afford to do that any longer.

ekianjo 13y ago

"Mr Nakanishi's strategy is working. Hitachi is back in profit. Hitachi trains are the front-runner in the competition to replace all of the UK's fleet of inter-city high-speed trains. " Mouhahha. Strategy is a long term thing. You can't the effects just in a couple of years. What a joke of an article.

gcb0 13y ago

It's the same economic shift we see since industrial revolution. Nobody here remembers, but one Italy was the cheapest labor. Everyone produced cheep stuff there. Then some companies started to produce quality product (and win races with what was cheap cars) and to be proud of made in Italy (which was a bad thing before). And when Italian design became expensive, markets moved on. I think there was another country in this step, but let's say cheap labor is now in Japan. When it started, only college students would buy Japanese cars (death traps) and Japanese stuff was deemed cheap. Come the same cycle. Companies start to show pride and produce quality stuff. Now made in Japan is expensive. Market moves on to China... Kia is now the car of the new rich with bad taste. But this will change soon (they are even trying to win prestigious rally in Africa) and soon Chinese products are going to be expensive. And probably some Latin or African country will be the next cheap labor.

rdouble 13y ago
Kia is from Korea.
- vetinari 13y ago
  Yup, Kia/Hyundai are from Korea, and the cars sold in EU are also made in EU.
- gcb0 13y ago
  You are correct. I think Korea is the country i couldn't remember before :) And it's following the pattern alright. Kia, Hyundai, lg. All companies that started with race-to-the-bottom products that are now trying to be market leaders
geon 13y ago
> Kia is now the car of the new rich with bad taste. Perhaps it is. I wouldn't know. Here in sweden, Kia is kind of popular (the Sorento SUV has a large market share), and has a reputation as being good quality to a reasonable price.

yekko 13y ago

It's simple, they didn't let their developers run free and are paid too little. You have to pay the creators of wealth in order to get wealth in return.

anizan 13y ago

Sony has been plagued with inability to deal with technology which disrupts their business model in any way. Network walkman which didn't support mp3 on purpose(would cannibalize media division) was so technologically stupid and ever since then they have lost the plot

adregan 13y ago

Though, Abe, the current Prime Minister of Japan a very conservative fellow, he surprised (at least) me the other day by announcing that he's interested in creating a culture of entrepreneurs and startups. The most shocking quote in a recent piece in the WSJ[1] might be Abe, referring to Rakuten.com's Mikitani, saying "I ask Mr. Mikitani to not be afraid of being labeled a trouble maker and to speak his mind to his heart's content." You really can stir up some trouble in Japan by suggesting changes to the status quo (something foreigners do with regularity), so it's very interesting to see a guy like Abe say this. Maybe I misjudged the guy. I think Japan needs to move away from the big electronics companies and focus on creating an environment more conducive to creating young interesting companies. 1: http://online.wsj.com/article/SB10001424127887324345804578424333742053290.html http://online.wsj.com/article/SB1000142412788732434580457842...

dharma1 13y ago

Often wondered this too. Japanese hardware is still good, but difficult to compete on price compared to Korean/Chinese. They have great developers, and have had for a long time, but it feels like the corporate structures themselves are too rigid to allow innovation to surface. You know these companies are doing something wrong when hobbyists have to reverse-engineer their firmware to get the functionality they want and need (I'm looking at you Canon and Panasonic). Sony is not much better, the user interfaces of their hardware feel 10 years old and the recently opened "app store" for their cameras is a joke, with no SDK or 3rd party apps available. As they focus away from TV's to cameras and sensors, that's something they should definitely fix if they want to succeed. The best thing these consumer electronics companies could do is open source parts of the firmware/software and engage more with consumers who are taking a more active role in developing products these days.