Tag: sharp

  • SHARP and the future of Japan’s electronics

    SHARP and the future of Japan’s electronics

    SHARP is in the news, but its about Japan’s US$ 600 billion electronics sector

    The need for focus and active portfolio management

    SHARP, supplier of displays to Apple, faces repayment of about YEN 510 billion (US$ 4.2 billion) in March.

    Innovation Network Corporation of Japan INCJ (産業革新機構) and Taiwan’s Honhai Precision Engineering (鴻海精密工業) “Foxconn” compete for control of SHARP.

    While SHARP makes headlines, the big-picture issues are:

    1. corporate governance reforms in Japan
    2. the future of Japan’s US$ 600 billion electronics sector, which dominated world electronics in the 1980s but failed to keep up with the evolution and growth of global electronics.

    To survive Japan’s old established electronics conglomerates have two choices:

    1. focus on a small number of key products (remember Apple CEO Tim Cook showing that all of Apple’s products fit on one small table)
    2. actively managed portfolio model

    however, for Japan’s economy to prosper, Japan needs many more young fresh new companies in addition to the old established conglomerates.

    Interviews for BBC-TV and French Les Echos

    Last week I was interviewed both live on BBC-TV and also by the French paper Les Echos about SHARP’s future:

    In summary, I said that its not just about SHARP’s current predicament, but its about corporate governance reform in Japan, about reinventing Japan’s electronics sector, and that its more likely at this stage that Japan’s Innovation Network Corporation (INCJ) will take control SHARP, since INCJ is not just concerned with SHARP but with the bigger picture of restructuring Japan’s electronics sector.

    INCJ has concepts for combining SHARP’s display division with Japan Display, and has plans for SHARP’s electronics components divisions, and for the white goods division, and other divisions.

    SHARP governance: How and why did SHARP get into this very difficult situation?

    SHARP is a poster child for the urgent need for corporate governance reform in Japan.

    Essentially SHARP assumed that the world market for TVs and PC displays will continue to demand larger and larger and more expensive display sizes, and thus took bank loans to build a very large liquid crystal display factory in Sakai-shi, south of Osaka.

    In addition, SHARP, has a huge portfolio of many different products ranging from office copying machines and printers and scanners, mobile phones, high-tech toilets, liquid crystal displays, solar panels, and hundreds of other products. SHARP keeps adding new product ranges constantly expanding its portfolio of businesses, and rarely sells loss making divisions.

    Effective and strong independent, outside Directors on the Board might have asked questions during the decision making leading to the building of the Sakai factory. They might have asked for a Plan B, in case the global display market takes a turn away from larger and larger and more expensive displays, or if the competition heats up and prices start decreasing, they might have asked about SHARP’s competitive strengths, they might have also questioned the wisdom to finance an expensive factory via short-term bank loans as opposed to issuing shares to spread the risks to investors.

    Its not just outside Directors, shareholders could have also asked such questions.

    SHARP has about YEN 678 billion (US$ 5.6 billion) debt, most is short-term debt, and in a few weeks, in March 2016, SHARP needs to repay about YEN 510 billion (US$ 4.2 billion), and needs to find this amount outside.

    SHARP is a Japanese electronics company, founded in 1912 by Tokuji Hayakawa in Tokyo as a metal workshop making belt buckles “Tokubijo”, and today one of the major suppliers of liquid crystal displays for Apple’s iPhones, iPads and Macs.

    SHARP today has about 44,000 employees, many factories across the globe, sales peaked around YEN 3000 billion (US$ 30 billion) in 2008, and show a steady downward trend since 2008.

    Revenues (profits) peaked in 2008, and have fallen into the red since.

    SHARP's revenues (sales) peaked in 2008, and since then stagnated around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
    SHARP’s revenues (sales) peaked in 2008 around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
    Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)
    Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)

    What future for SHARP? Focus vs portfolio company

    SHARP (or rather, its creditors, the two “main banks” Mizuho and Mitsubishi-Tokyo-Bank, and others controlling the fate of today’s SHARP) needs to decide whether it focuses on a group of core products, in which case it needs to be No. 1 or No. 2 globally for these products. Successful examples are Japan’s electronic component companies.

    Or on the other hand, SHARP could be a portfolio company, in which case this portfolio must be actively managed.

    What future for Japan’s US$ 600 billion electronics sector?

    Japan’s 8 large electronics conglomerates:

    • Hitachi
    • Toshiba
    • Fujitsu
    • NEC
    • Mitsubishi Electric
    • Panasonic
    • SONY
    • SHARP

    combined have sales of about US$ 600 Billion, similar to the economic size of The Netherlands, but combined for about 15 years have shown no growth and no profits. They are poster children for the urgent need for corporate governance reform in Japan.

    These 8 electronics conglomerates are portfolio companies, and they need to manage these portfolios actively, such as General Electric (GE) or the German chemical industry are doing. Germany’s large chemical and pharmaceutical industries started active and drastic product portfolio management in the 1990s, and are continuing constant and active portfolio optimization via acquisitions, spin-outs, and other M&A actions, and so is GE.

    A stark contrast are Japan’s very successful, profitable and growing electronics component companies.

    Innovation Network Corporation of Japan INCJ (産業革新機構)’s dilemma

    INCJ aims “to promote the creation of next generation businesses through open innovation” according to its website.

    Japan’s NIKKEI financial daily mentions INCJ’s dilemma, whether attempting the rescue of an old conglomerate is compatible with its mission to create next generation business through open innovation.

    Why “let zombie companies die” is beside the point

    Concerning SHARP some media wrote headlines along the lines of “let zombie companies die”. Thats easy to write, however, SHARP is a group with 44,000 employees, many factories, about US$ 30 billion in sales annually.

    “Let this zombie die” is not an option, SHARP has 100s of products, and divisions, and the best solution for each of these divisions is different. And that is exactly what the Innovation Network Corporation of Japan seems to be considering in its plans for SHARP.

    I think the way forward is not “to let zombies die”, but to develop private equity in Japan

    I think the move of Atsushi Saito, one of the key drivers of Japan’s corporate governance reforms, from CEO of Tokyo Stock Exchange/ Japan Exchange Group, to Chairman of the private equity group KKR is a tremendously important one in this context.

    Will there be native Japanese private equity groups with sufficient know-how and ability to take responsibility of restructuring Japan’s electronics sector? Thats maybe the key question.

    Why its not really about nationalism

    Some media bring a nationalist angle into SHARP’s issues. However, Nissan was rescued by French Renault, UK’s Vodafone acquired Japan Telecom, and there are many other examples, where foreign companies acquire Japanese technology companies.

    I don’t think nationalism is an issue here. The key issues is to create and implement valid business models for Japan’s huge existing electronics sector, and more importantly, create a basis for the growth valid new companies – not just reviving old ones.

    Japan electronics industries – mono zukuri

    Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

  • Japanese electronics parts makers grow, while Japan’s iconic electronics makers stagnate

    Japanese electronics parts makers grow, while Japan’s iconic electronics makers stagnate

    by Gerhard Fasol

    Japan’s iconic electronics groups combined are of similar size as the economy of The Netherlands

    Parts makers’ sales may overtake iconic electronics groups in the near future – they have already in terms of profits

    In our analysis of Japan’s electronic industries we compare the top 8 iconic electronics groups with top 7 electronics parts makers over the period FY1998 to FY2014, which ended March 31, 2015 for most Japanese companies. Except for Toshiba, all Japanese major electronics companies have now officially reported their FY2014 results.

    Japan’s iconic 8 electronics groups (Hitachi, Toshiba, Panasonic, Fujitsu, Mitsubishi Electric, NEC, SONY and SHARP) combined are as large as the economy of The Netherlands – but while the economy of The Netherlands doubled in size between 1998 and 2015, the sales/revenues of Japan’s iconic 8 electronics groups combined showed almost zero growth (annual compound growth rate = 0.4%) and almost zero income (profits).

    Japan’s top 7 electronics parts makers on the other hand – similar to the Netherlands – more than doubled their combined revenues (sales) over the 17 years from FY1998 to FY2014, and earned healthy and increasing profits.

    While several of Japan’s iconic electronics groups are fighting for survival, Japan’s parts makers have very ambitious growth plans – some of them may well overtake the traditional electronics conglomerates in sales – they have already in terms of profits. And they aggressively acquire around the world.

    Detailed data and analysis in our Report on Japan’s electronics sector

    Japan’s electronics parts makers combined more than doubled sales over the last 17 years

    Japan's top 7 electronics parts makers grow at CAGR of 4.6%
    Japan’s top 7 electronics parts makers grow at CAGR of 4.6%

    Japan’s iconic top 8 electronics groups showed almost no growth over the last 17 years

    Japan's top 8 iconic electronics groups stagnate - some fight for survival
    Japan’s top 8 iconic electronics groups stagnate – some fight for survival

    Japan’s electronics parts makers grow – the traditional electronics groups stagnate

    Japan's electronics parts makers grow - Japan's iconic electronics groups stagnate
    Japan’s electronics parts makers grow – Japan’s iconic electronics groups stagnate

    Japan electronics industries – mono zukuri

    Copyright 2009-2019 Eurotechnology Japan KK All Rights Reserved

  • Japan’s electronics giants – FY2012 results announced. 17 years of no growth and no profits.

    Japan’s electronics giants – FY2012 results announced. 17 years of no growth and no profits.

    Japan’s electronics giants: as large as the economy of Holland, but 17 years of stagnation. No growth & no profits.

    Daniel Loeb: SONY’s uninvited guest gives Japan’s business culture a jolt

    Japan’s electronics giants combined are as large as the economy of Holland, but did not grow for about 17 years, and on average lost money all these years: no growth – no profits.

    SONY abruptly created global headlines (e.g see New York Times), because US activist investor Daniel Loeb publicly encourages SONY’s CEO to speed up change. Mr Loeb’s Third Point LLC fund is SONY’s biggest shareholder at this time – surprising many, maybe even surprising SONY’s CEO, Mr Hirai. Mr Loeb’s encouragement was well timed: Mr Hirai’s will present SONY’s new strategy on May 22.

    As we analyzed in our newsletter a few days ago and in more detail in our Electronic Industry Report, which was picked up by EE-Times and by the BBC, SONY recently earns its income, and offsets losses from the electronics and mobile phone businesses, mainly from asset sales and from subsidiary SONY-Finance – which sells life-insurance and credit cards. Therefore many believe that iconic SONY is undervalued, and needs much deeper and more fundamental change.

    Japan’s iconic Big-8 electronics giants posses amazing technologies and engineers. However, their current situation is very much less than amazing, indicating huge opportunities. A few days ago the Big-8 all announced their results for FY2012, which ended on March 31, 2013 – lets look at the results together here.

    long slow path to recovery for Japan's "Big-8" electronics giants
    long slow path to recovery for Japan’s “Big-8” electronics giants

    Japan’s electronics giants: Averaged over the last 15 years, Japan’s Big-8 created net losses of YEN 104 billion/year

    Subtracting losses from profits, and averaged over the last 15 years, Japan’s Big-8 created net losses of YEN 104 billion/year (US$ 1 Billion losses/year)

    For the last two financial years the Big-8 created net losses as follows:

    Financial Year ended combined net losses
    FY2012 March 31, 2013 YEN 1143 Billion (US$ 11 Billion)
    FY2011 March 31, 2012 YEN 909 Billion (US$ 8.9 Billion)

    Hitachi’s smart transformation

    Hitachi’s smart transformation (find an overview in our report) indicates that change can bring rapid improvement.

    Japan's "Big-8" electronics makers combined are about the size of Holland's economy - with one difference: Holland's economy grows, but Japan's electrical giants shrink and lose money at the same time
    Japan’s “Big-8” electronics makers combined are about the size of Holland’s economy – with one difference: Holland’s economy grows, but Japan’s electrical giants shrink and lose money at the same time

    No growth

    No growth: combined revenues of the Big-8 fell by YEN 1510 Billion (US$ 15 Billion) in the 15 years between FY1997 and FY2012 (assuming constant value YEN)

    Many expect that “smart transformation” and globalization, and opening-up to the global society – combined maybe with a rejuvenation of “the Japanese model”, can release the potential for growth, which has been held back for 15 years.

    In our electronic industry report we compare the Big-8 electronics companies with the Big-7 electronic parts manufacturers and show that their situation is much better, however the parts manufacturers face decreasing margins, also indicating the need for changing the business models and/or operations.

    Japan's "Big-8" may be seen as undervalued
    Japan’s “Big-8” may be seen as undervalued

    Japan’s Big-8 electronics makers combined have far lower market capitalization than Apple, Microsoft, Google or Samsung

    We produced the figure above for the presentation at the Foreign Correspondents Club in Tokyo about the “Apple-Samsung Patent War and Impact on Japans Industries”. We used the figure above to visualize the might of the Apple and Google/Samsung camps vs Japan’s Big-8 today. 15 years ago, the power of Apple vs Samsung vs Japan’s Big-8 was exactly opposite.

    There is no reason why Japan’s electronics sector cannot regain global strength and value – IF absolutely necessary changes are made. This situation represents outstanding opportunities, which no doubt are attracting Mr Loeb and his Third Point fund, and others.

    Understand Japan’s electronics sector: top 8 giants, and top electronic component makers

    Study our report “Japan electronics industries: mono zukuri” (approx. 230 pages, pdf file)

    Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

  • Intellectual Japan – BBC: “Japan has to become a brain country” – from mono zukuri to brain country

    Intellectual Japan – BBC: “Japan has to become a brain country” – from mono zukuri to brain country

    Intellectual Japan: Japan’s electronics companies need new business models – interview for the BBC

    The BBC recently examined why Japan’s electronics sector has to create new business models, and quotes “Japan has to become a brain country”.

    Japan’s top 8 electronics companies combined are as large as the Netherlands economically, but have shown zero growth and zero income over the last 14 years – thus represent “sleeping giants” – or dinosaurs, depending on the point of view, and depending on whether these companies succeed to reinvent themselves.

    We have updated our report on “Japan’s electronic manufacturers: mono zukuri” to analyze Japan’s electronics manufacturing sector, and to explain who the winners and who the losers are. Read a short summary in this newsletter below.

    apan's electronics companies combined are as large as Holland economically
    apan’s electronics companies combined are as large as Holland economically

    Japan’s top electronics companies combined are as large as the Netherlands economically, but have not shown any revenue growth over the last 14 years

    Japan’s electronics sector still today is largely guided by national industrial policy, and by the management principles created long ago by charismatic founders such as Matsushita and Ibuka.

    Intellectual Japan: smart transformation at Hitachi led by the CEO and by the Chief Transformation Officer CTrO

    Hitachi’s “Chief Transformation Officer” (“CTrO”) at a recent presentation, explained that until 2 years ago Hitachi benchmarked its financial data purely domestically – until 2 years ago, Hitachi only compared performance with competitors such as Panasonic and Toshiba.

    Only 2 years ago, Hitachi started to benchmark performance with global competitors such as GE and Siemens.

    Read a summary of Hitachi’s “Smart Transformation project” in our electronics industry report.

    Japan's top 8 electronics companies combined lose YEN 50 billion/year since 1998
    Japan’s top 8 electronics companies combined lose YEN 50 billion/year since 1998

    Japan’s top 8 electronics companies lost an average of YEN 50 billion/year over the last 14 years

    Intellectual Japan: electronic component makers

    Japan’s electronics component makers, such as Kyocera or Murata, which is on the official supplier list of Apple, report positive income – although margins are declining and the component industry sector is much smaller than the top 8 electronics manufacturers.

    Drastic transformation is necessary to revive Japan’s electronics industry sector. Drastic change will happen one way or another and represents important opportunities. More details in our electronics industry report

    Japan electronics industries – mono zukuri.

    Copyright 2013 Eurotechnology Japan KK All Rights Reserved

  • Japanese electronics groups need new business models (BBC-interview: Yen ‘not the cause of woes of Japan’s electronics firms’)

    Japanese electronics groups need new business models (BBC-interview: Yen ‘not the cause of woes of Japan’s electronics firms’)

    Japanese electronics groups combined as of similar size as the economy of the Netherlands

    Over the last 15 years combined annual sales growth was zero, and combined annual loss was US$ 0.6 billion/year

    Japan’s “Big-8” electrical groups (Hitachi, Panasonic, Sony, Mitsubishi-Electric, Sharp, Toshiba, Fujitsu, NEC) combined are of similar economic size as the Netherlands.

    Over the last 15 years, their combined annual sales growth was zero, and their combined annual loss was YEN 50.6 billion/year (= US$ 0.6 billion/year).

    Compelling evidence that new business models for Japan’s electronics sector present a huge opportunity – as explained in this BBC interview.

    Sales growth of Japan's "Big-8" electrical manufacturers vs top 7 electronics component makers
    Sales growth of Japan’s “Big-8” electrical manufacturers vs top 7 electronics component makers

    Contrasting Japan’s “Big-8” electronics groups (Hitachi, Panasonic, Sony, Mitsubishi-Electric, Sharp, Toshiba, Fujitsu, NEC) with Japan’s 7 electronic parts makers (Murata, Kyocera, TDK, Alps, Nidec, Nitto, ROHM)

    Over the last 14 years since FY1997, the combined growth in revenues (=sales) of Japan’s “Big-8” electronics groups was zero.
    The compound annual growth rate (CAGR) of Japan’s top 7 electronic parts makers combined was +3.1%.

    Net income/losses of Japan's "Big-8" electronics giants vs top-7 electronics components makers
    Net income/losses of Japan’s “Big-8” electronics giants vs top-7 electronics components makers

    Net income (profit) of Japan’s “Big-8” electronics groups vs top-7 electronics parts makers

    Over the last 14 years since FY1997, Japan’s “Big-8” electronics groups combined showed average losses of YEN 50.6 billion/year (=US$ 0.6 billion/year), while Japan’s top 7 electronic parts makers combined earned YEN 196 billion/year (= US$ 2.4 billion/year).

    Net income/losses of Japan's top electrical groups
    Net income/losses of Japan’s top electrical groups

    Net after tax income of Japan’s “Big-8” electronics groups

    This figure shows net after tax income for Japan’s “Big-8” electronics groups (Hitachi, Panasonic, Sony, Mitsubishi-Electric, Sharp, Toshiba, Fujitsu, NEC), for the years since FY1997. For 5 of these 14 years the industry sector reported combined losses, which in total exceeded the profits achieved in good years.
    As a result, averaged over all 14 years, the industry sector shows combined losses on the order of US$ 0.6 billion/year.

    Creating new business models for this very large industry sector (of similar economic size as the Netherlands) is a huge opportunity.

    et income/losses of Japan's top-7 electronic component makers
    et income/losses of Japan’s top-7 electronic component makers

    Net income of Japan’s top 7 electronic parts makers

    Japan’s top 7 electronic parts makers are in a much better financial situation than Japan’s electrical groups.

    Over the last 14 years since FY1997, this industry sector only showed a net overall loss one single time – in the year following the Lehman shock, but showed combined net profits during all other years, resulting in average annual net profits on the order of US$ 2.4 billion/year.

    BBC interview: "New business models for Japan's electrical groups needed"
    BBC interview: “New business models for Japan’s electrical groups needed”

    BBC interview:
    Watch an extract of the BBC interview about Japan’s electrical industry sector here: Yen ‘not the cause of woes of Japan’s electronics firms’.

    More detailed data and analysis in our report on Japan’s electronics industry sector.

    Japan electronics industries – mono zukuri

    Copyright 2013 Eurotechnology Japan KK All Rights Reserved

  • Taiwan’s Hon Hai Group invests in SHARP

    Taiwan’s Hon Hai Group invests in SHARP

    Crunch time? – reviving Japan’s huge electrical/electronics sector

    SHARP fighting for survival

    SHARP (6753) last month forecast a record YEN 290 Billion (US$ 3.5 Billion) loss for this financial year – more than 1/2 of SHARP’s market cap, and SHARP’s new Sakai factory is reported to work at 1/2 capacity.

    Taiwan’s Hon Hai Group (which includes Foxconn, which is known to assemble Apple’s iPhones and iPads), and founder Terry Gou invest about YEN 133 Billion (about US$ 1.6 Billion in SHARP:

    1. Hon Hai Group will invest YEN 66.9 Billion in newly issues SHARP-shares corresponding to a 9.9% holding, and will become SHARP’s largest share holder
    2. Hon Hai’s Chairman Terry Gou and related investment companies will buy 46.5% of SHARP Display Products Corporation for YEN 66 Billion reducing SHARP’s holding from 93% to 46.5% (note that SONY preferred not to increase its holding in SHARP Display Products Corporation, which operates the Sakai factory)
      click below to watch video clip (initial plan for the interview was to discuss the ELPIDA bankruptcy, but at the last minute we switched the interview to the Hon Hai investments in SHARP, because of the potentially much bigger impact on Japan)

    There is a wide range of implications

    • Clearly the business models which have sustained Japan’s huge electrical sector for several decades have reached end-of-live, and restructuring as well as much more opening to the outside, non-Japanese world are becoming more and more urgent. Much of our Post-Galapagos Working Group efforts last year were devoted to this urgent need.
    • SHARP’s financial problems may not be solved yet, and further investments by Hon Hai or others might well be on the horizon
    • APPLE – although not directly involved in the transaction – is the center of power. With the investment Hon Hai may hope, that a combination of Hon Hai and SHARP may become a stronger supplier to APPLE than each company alone. SHARP has been reported to use Hon Hai’s investment to increase production of LCD displays for smart phones, and tablets.
    • Comparing market capitalization, it’s clear who the stronger partner is:
      • SHARP = US$ 6.6 Billion market cap
      • Hon Hai = US$ 39 Billion market cap

    For data and detailed analysis download our report on:

    Japan’s electronics industry sector

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  • When did qr-codes start on mobile phones? (in August 2002)

    When did qr-codes start on mobile phones? (in August 2002)

    qr-codes were developed by Toyota subsidiary denso-wave

    When did qr-codes start on mobile phones: First mobile phone with qr-code reader was the J-SH09 by SHARP for Japanese mobile operator J-Phone

    When did qr-codes for mobile phones start in Japan?

    Here is the answer: the first mobile phone with qr-code reader was the J-SH09 produced by SHARP for Japan’s J-Phone mobile operator (today’s Softbank) and came on sale in August 2002 – seven years ago.

    More details and more than 100 case studies of qr-code applications in our QR-Code report

    Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

  • Japan’s games sector overtakes electrical sector in income

    Japan’s games sector overtakes electrical sector in income

    Japan’s games sector is booming – and net annual income of Japan’s top 9 game companies combined has now overtaken the combined net income of all Japan’s top 19 electronics giants (including Hitachi, Panasonic, SONY, Fujitsu, Toshiba, SHARP… at the top, and ROHM, Omron… further down the ranking list).

    Why does it make sense to compare electronics giants with game companies? In many areas, especially home electronics and personal portable devices these two sectors compete for exactly the same consumer spending budgets and mind share.

    Pressure on Japan’s electrical giants for much more fundamental restructuring is increasing. More details below and find our calculations and analysis explained in our reports: Report on Japan’s electrical industry sector and our Report on Japan’s game industries.

    Figure compares the added total net income of Japan’s top 18 electrical companies (Hitachi, Panasonic, SONY…) with the combined total net income of Japan’s top 9 games companies (Nintendo, Bandai Namco…, not including SONY Computer Entertainment, because net income is not available).

    The games sector – lead by Nintendo – shows stable net income all through the current crisis years. While pressure on the electrical giants for more fundamental restructuring is increasing.

    -Money as a percentage of total money in Japan
    -Money as a percentage of total money in Japan

    Combined total net annual income of Japan’s games sector. (SONY Computer Entertainment is not included, since net income is not available)

    Combined annual income of Japan's top game companies
    Combined annual income of Japan’s top game companies

    Detailed analysis in our report on Japan’s games sector.

    Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

  • Japan electronics groups: global benchmarking

    Japan electronics groups: global benchmarking

    Japan electronics groups have far lower income/profits than EU or US comparable corporations

    Ripe for drastic reform and transformation: 18 years no growth and almost no profits

    Lets look at global benchmarking of Japan’s top electrical groups Panasonic and Hitachi (representative of Japan’s top ten electrical giants) – in our previous blog we suggested that full recovery to 2008 (FY2007) levels may take until 2016 – about seven years in terms of income, and about 3-4 years in terms of revenues – UNLESS major restructuring happens. Will it be done?

    We also take a look at specialist ROHM, which used to have outstanding margins because of the focus on highly specialized electrical and electronic components. ROHM’s shareholder proposals recently made headlines.

    Comparing Japan’s top electrical groups Panasonic and Hitachi with GE and SIEMENS clearly shows the different philosophies in US, EU and Japan:

    US based GE aims for 15% net margin.

    Germany based Siemens and Japanese giants Panasonic and Hitachi in the 1990s all had net margins close to zero. However, while Panasonic and Hitachi maintained their margins close to zero since the 1990s, Siemens clearly aims for US level margins – and achieved a slow and steady upward trend.

    Very dramatic restructuring would be necessary to bring Japan’s electric giants onto such a path. I think it is quite obvious exactly which restructuring is necessary. I also believe that if carried out it will actually create more employment in Japan than maintaining the existing structure of Japan’s electrical industry sector. However, actually carrying such restructuring will require superhuman effort… will this happen?

    Resistor maker ROHM

    Rohm is another interesting story – and a fascinating Kyoto-culture company (with headquarters not so far from superstar Nintendo). Rohm was founded in 1958 by today’s CEO Sato Kenichiro to make resistors, and he later changed the name to R.ohm and then ROHM – today 80% of products are semiconductors. With increasing competition ROHM’s initially very high margins melted away. To counter the trend towards commoditization, ROHM invests heavily in R&D with technology centers around the world. Last week ROHM made global headlines: US fund Brandes had proposed a US$ 157 million share buy back, which was rejected at the shareholder meeting. Looking at ROHM’s margin over the years, its clear that action is required to bring margins again from today’s zero to the previous 20% level. I can sympathize with shareholders who think that a Shuji Nakamura / Nichia-type R&D breakthrough would be more likely to deliver such a comeback rather than a share buy back.

    Note that not all shareholder proposals by US or European funds are rejected summarily at Japanese company shareholder meetings… some well prepared proposals have actually been accepted successfully.

    Margins of Panasonic, Hitachi, Rohm with Siemens and GE
    Margins of Panasonic, Hitachi, Rohm with Siemens and GE

    Starting from similar positions in the 1990s:

    GE, Siemens, Hitachi and Panasonic all four had almost the same size in terms of annual sales back in the 1990s – today GE is twice the size of Hitachi or Siemens and 2.5 the size of Panasonic

    Today, GE is about twice the size as Hitachi or Siemens, and about 2.5 the size of Panasonic. It seems that successful globalization is a necessary factor to achieve GE-style growth – necessary, but not sufficient… (see: our analysis of dramatic differences in globalization of Japan’s electric groups). The current crisis is a big opportunity for further growth by strong companies.

    Revenue growth of Hitachi and Panasonic compared with SIEMENS and GE
    Revenue growth of Hitachi and Panasonic compared with SIEMENS and GE

    Japan electronics industries – mono zukuri

    Copyright 2013 Eurotechnology Japan KK All Rights Reserved

  • Foggy Outlook for Global Tech Sector (CNBC TV interview)

    Foggy Outlook for Global Tech Sector (CNBC TV interview)

    Foggy Outlook for Global Tech Sector (Airtime: Tues. Feb. 10 2009)

    Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

  • Japan trends 2008/2009

    One of our clients in the financial industry asked me several trend questions:

    1. Q1: Biggest surprises in Japan in 2008?
      • Collapse of Japan’s mobile phone handset market (read our blog). In this context the Japanese telecom equipment makers association invited me to give a presentation, which was booked out 2-3 weeks ahead – about 100 Japanese telecom equipment maker managers attended! The General Affairs Vice-Minister / Secretary of State attended….
      • The dramatic increase of acquisitions by Japanese companies:
    2. Q2: Biggest changes for 2009?
      • Hopefully LED/Solid state lighting going mainstream to save energy
      • Batteries and solar cells in combination starting to replace petrol for cars
      • Solar cell battle (between Q-cells, SHARP and others)
    3. Q3: Key topics in Japanese media for 2009?
      • Financial crisis and reviving the economy
      • Crisis of the car industry – and car industry’s paradigm shift

    Copyright 2013 Eurotechnology Japan KK All Rights Reserved

  • Paradigm change of the global mobile phone business and opportunities for Japanese mobile phone makers

    Presentation at the CEATEC Conference, talk NT-13, Meeting Room 302, International Conference Hall, Makuhari Messe, Friday October 3, 2008, 11:00-12:00.

    See the announcement here [in English] and in Japanese [世界の携帯電話市場のパラダイム変更と日本の携帯電話メーカーのチャンス]

    The emergence of iPhone, Android, open-sourcing of Symbian, and the growth of mobile data services are changing the paradigm of the global mobile phone business opening new opportunities for Japanese mobile phone makers. Japan’s mobile phone handset makers have missed most opportunities during the first wave of mobile phone opportunities. The developing paradigm change opens new opportunities for Japanese makers. The talk will explain the paradigm shifts and trends of the global mobile phone handset market, and resulting opportunities for Japanese mobile phone makers, and will indicate how these opportunities can actually be realized.

    Copyright 2013 Eurotechnology Japan KK All Rights Reserved

  • SHARP pretax profit increases 26%

    When BusinessWeek interviewed me for an article about SHARP in October 2004, the journalist interviewing me was very surprised that I was talking to him on a SHARP mobile phone.

    While NEC and Matsushita are merging their mobile phone development, SHARP has leveraged the power to make the best displays into market leadership in Japan’s mobile phone market. While NOKIA leads outside Japan, in Japan’s market, NOKIA has a market share of around 0.5% and SHARP is No. 1.

    Yesterday (July 25, 2006) SHARP announced quarterly results:

    One year-on-year basis, sales for the April-June 2006 quarter have increased 13% to YEN 693.7 Billion (US$ 6 Billion), and revenues from mobile phones have increased 24% to YEN 131.6 Billion (US$ 1.1 Billion). Net profit increased 23% to YEN 23.8 Billion (US$ 0.2 Billion) for the April-June quarter.

    SHARP focuses on the high quality top end of the market: while store prices of LCD TV’s have fallen by 30%, SHARP’s prices/unit have only fallen by 4%.

    Similar to SONY (Qualia) and TOYOTA (Lexus), SHARP has introduced the new brand AQUOS for high-end liquid crystal displays. AQUOS features prominently in SoftBank’s rebranding campaign for Vodafone’s former Japan subsidiary, which will soon be called SoftBank-Mobile.

    SHARP mobile phone
    SHARP mobile phone

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