Made In Japan Digital Consumer-Electronics Becomes More Affordable

September 27, 2009 – Osaka, Japan,

Nikkei, Japan’s leading newspaper specialized in economy and politics, announced today that Japanese consumer-electronics giants including Sony and Fujitsu are to start marketing in earnest low-end digital consumer-electronics. This is because demand of low-end digital consumer-electronics with limited features is expanding even in developing countries worldwide, growing as the “volume zone” of the market. Taiwan makers have been leading in this market segment and Japanese makers aim to take the offensive by leveraging EMS (Electronic Manufacturing Service) of Taiwan that has manufacturing plant in China, where the labour cost is low.

For mobile PC, Sony is to commission designing and production of net book, mobile PC of price zone around 50,000 yen utilizing EMS. Section responsible for interacting with EMS will be located in PC Division and people responsible for EMS will be located in China. With this strategy, Sony intends to increase its worldwide PC sales from original plan of 6.2 million units for 2009 to more than 10 million. Fujitsu that entered net book market April this year plans to double for 2009 EMS production from 2008 which was 600,000 units. Fujitsu plans to achieve total worldwide PC sales of 6.5 million, including approximately 300,000 units for net book PCs.

As for video camera, Victor will launch new model(s) with price range of 20,000-30,000 yen, half of the current models, in October for European market, and plans to launch in Japan and the U.S. as well. They do so by utilizing EMS reducing cost. Sony has already launched product(s) with price range of 10,000-20,000 yen this spring in the U.S. and Europe.

As for car navigation systems, Pioneer was the first Japanese maker to use EMS, to successfully market product with price of approximately 50,000 yen, which is half their previous products.

As for flat panel TVs, Toshiba plans to increase low price range LCD TVs to achieve sales target of 1.3 million units in 2009 and in 2010 to achieve 3 million units in 2010 for emerging countries. Sharp has already launched a model with price around 50,000 yen in China this year.

According to Display Research, a U.S. market research company, global net book sales is estimated to reach 3.5 million units for 2009 which is more than double of 2008. This is about 20% of total mobile PC sales. In addition, some experts expect that 40-50% of the U.S. video camera market will be of low-end products for 2009.

Japanese digital consumer-electronics giants have been focusing on high-end products that is usually said to be impacted by price competition. Their strength is “vertical” network, engaging in from developing backbone parts to assembling. However, such companies as Taiwan competitors such as Asus and low-end video camera maker under the umbrella of Cisco Systems have been increasing their presence in the worldwide market. If this trend proliferates in Japanese market as well, it is quite possible that Japanese makers would need to further outsource their production offshore.

To the author, it is high time for Japanese consumer-electronics giants to review and change their strategy as appropriate, applying concept and mechanism of “The Innovator’s Dilemma” and “The Innovator’s Solution” of Clayton M. Christensen.