Asian Competition and Lack of Innovation Slowly Killing Japanese Conglomerates

Japanese Conglomerates like Sharp, Panasonic, Mitsubishi used to be the undisputed kings of 1980s when they could do no wrong. These Japanese giants which were grown under the care of the Japanese government department METI have operations in hundreds of countries and revenues in the hundreds of billions. However for the past few years they have not been able to earn any decent profits. And last year in 2011 they have mounted massive losses. Panasonic is going to lose an astounding $10 billion this year while others like Sony, Sharp and other will do equally badly. While some factors are temporary like

a) High Yen

b) Thailand Floods where many Japanese corporations have big factories

c) Fukushima Earthquake

Other factors are more structural in nature

1) Korean and Chinese companies are eating the Japanese lunch with their faster innovation and low costs. They are proving to be more nimble than the massive Japanese companies which continue to lose  marketshare and revenues. Samsung and LG have captured the semiconductor and electronic industries with their better marketing and aggressive strategies.

2) Apple has become the dominant computer, phone player using tremendous innovation and leveraging low cost manufacturing in China.

Sharp which has managed till now to survive with its high costs in Japan factories too is now facing the pressure.Japanese market is highly protectionist with majority of the demand going to  Japanese zaibatsus.The Japanese government is helping Solar Companies with subsidies/diplomacy to sell Japanese solar panels in Asia and Africa.Sharp now is being forced to move off the islands of  Japan as the high cost of labor and currency makes it uncompetitive in the fiercely cutthroat solar panel global market.Sharp has a giant thin film silicon factory in Sakai and cell/module operations spread out in Japan.It will now manufacture more of its cells/modules overseas to cut down on the cost which are much higher than the Chinese.Note while Sharp is still a long way in suffering the fate of the likes of Evergreen Solar,there is no doubt that it is under huge pressure

In other places like solar energy and led , Chinese companies are using their super low costs to beat out the Japanese companies which were the biggest earlier. The Japanese zaibatsus are losing their mojo  and being slowly killed to insignificance. Unless they drastically change their act they will continue to decline . Sony is one such example of how the Japanese have lost their throne with the company making massive losses in the industry where it has one of the most famous brands Bravia

 Japan’s biggest makers of phones, televisions and chips say they’ll lose about $17 billion this year, about three-quarters of what Samsung Electronics Co. will spend on research to lengthen the lead over its competitors.

Sony Corp. more than doubled its annual loss forecast for the year ending March 31 as it announced a new chief executive officer, while Panasonic Corp. and Sharp Corp. predicted the worst losses in their histories. Their combined losses compare with the $22 billion that Samsung, Asia’s largest consumer- electronics company, said it will invest in capital expenditures.