Japan’s electronic giants once ruled the world. Sony, Panasonic, Sharp were household names.
Now those same companies are in deep trouble, losing billions of Pounds a year. How have the mighty Japanese companies fallen so low?
Sony may make a small profit this year, its first since 2008. Panasonic (formerly Matsushita) is expected to post a £6 billion loss this year. Sharp, which is much smaller, is losing money so fast it will not survive another year without a major infusion of cash.
The Japanese giants, built their empires on making complex electrical machines – colour televisions, radios, cassette players, refrigerators and washing machines.
Yes, they contained electronic components, but they were basically mechanical devices. Then came the digital revolution- and the world changed.
The Sony Walkman is a classic example. it has no software in it. It is purely mechanical. Today you need to have software business models that are completely different.
The digital revolution not only changed the way electronic devices work, they changed the way they are made.
The whole manufacturing model shifted as companies moved production to low-cost countries. That has put huge downward pressure on profit margins for Japanese manufacturers.
Apple makes at least 50% profit margins on iPads and iPhones. People say iPhones are made in China, but maybe only 3% of the value of an iPhone stays in China. Quite a bit of the value actually transfers to the UK- where ARM makes the high value chips without which the boxes would be inert.
It is no longer possible to make profits today just by manufacturing – you have to do a lot more.
Just look at the car manufacturers- they have far more electronics in them than just mechanical engines. If you compare the under the bonner experience today with twenty years ago, it’s amazing the difference.
And if you car does breaksdown- twenty years ago a socket set, hammer and screwdriver could fix it. Now you need to plug a laptop into the car to diagnose the issues.
Times- they are achanging.