- Things are so bad at Sharp that it may have to ask the Japanese state to bail it out when its $2.5bn of convertible bonds fall due next year.
- This is not new news to anyone as Sharp raised concerns about its status as a going concern when it reported its most recent results on Nov 1st but still it was enough to send the shares down 7%.
- This is just the latest episode in a 5 year saga that I think can only end in the annihilation of the Japanese from the world of consumer electronics.
- There are essentially two main reasons for this inexorable march to destruction:
- Hardware is becoming a commodity with all the value being added through software and the user experience. Japanese companies have no clue about how to create a user experience that any one will value outside of Japan. (Frankly, the popularity of Apple products in Japan is an indication that they are losing it in the home market as well).
- The Japanese cost base is ludicrously high and despite their best efforts, they are unable to bring it under control. This is because the Japanese electronics companies have the worst case of engineering disease (see Google – Engineering disease) that I have ever seen and it may well be the death of them.
- It is the display industry that has been the worst for them and while the Korean companies prosper and invest, the Japanese are desperately trying to keep their heads above water, falling further and further behind.
- The reason is simple. It’s the same as it was in other consumer electronics: they had an edge and they lost it when the nature of the market changed.
- 5-8 years ago there were very few HD transmissions and so the vast majority of people watched Standard Definition programs and DVDs on HD panels.
- This meant that the SD signal had to be upscaled to match the display.
- This was actually much more difficult than it sounded because one had to deal with significant on-screen artefacts that killed picture quality.
- It was the perfect problem for the Japanese to solve as it was rigidly defined and engineering driven.
- As a result, Japanese TVs were by far the best at upscaling SD signals to HD panels.
- This led to better products, willingness by consumers to pay premium prices and high market share.
- It was the premium pricing that allowed the Japanese to survive with a much higher cost base than the competition.
- Unfortunately, the combination of many more HD transmissions and the commoditisation of upscaling technology, led to the edge being lost.
- The Japanese could no longer charge a premium and so the long and tortuous decline began.
- The Koreans now make better products far more cheaply than the Japanese, and because they make money, they have been investing in the next generation (OLED TV).
- Hence, I suspect that as OLED comes to market, The Japanese will exit stage left, never to be seen again in the world of television.
- This is an extreme case but I suspect the same will be true for the rest of consumer electronics as well.
- Hardware is commoditising fast meaning that differentiation through software is required in order to keep consumers interested.
- The Japanese simply do not have the skill set to address this change and so like portable music, televisions and increasingly in the gaming market, the edge is being lost.
- If Sharp survives, it is more likely to make the propelling pencil it invented than it is to make a comeback in consumer electronics.
- I would also put Panasonic and Sony in the same boat although Sony may be able to withstand the ravages of inevitability somewhat longer than its peers.
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Japan TV – A glimmer of hope | Radio Free Mobile
January 10, 2013 at 10:31 am
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