TOKYO – I trust I am not alone wanting to know what brought the reversal of fortunes to Japan’s economy, which looked pretty much invincible in the 1980’s.
More specifically, I’m interested in finding out why the pride of Japan Inc., the electronics industry, has sunk so low.
The diagnosis of Japanese semiconductor companies and CE vendors involves no shortage of theories and viewpoints.
Armchair analysts often zero in on macro factors like the rote-learning education style of Japan (less emphasis on creativity), the utter lack of a sense of urgency among Japanese workers (getting too comfortable with their wealth), non-existent global perspectives, Japan’s stubborn lack of fluency in English, outdated industrial policies driven by elite bureaucrats, slow decision-making process (or their skills in making no decisions at all), and perhaps most important, a complete lack of leadership in management--both in the political and industrial worlds.
Meanwhile, Japanese electronics companies, when reporting their dismal performance in recent years, typically blamed their failures on three factors: the historic high of the Japanese yen, the devastating flood in Thailand and the dramatic cratering of prices [for DRAMs, LCD TVs, etc.]. Surely, there’s truth in these alibis. But these outside factors are hardly the root cause for what ails Japan.
However, there are two things–although often absent from the debate, especially among Japanese themselves–that I’d like to finger as the real culprit behind the downfall of Japanese electronics industry.
One is the tendency among Japanese companies to overbuild over-specified, high-quality [chips and systems] in the costly and time-consuming pursuit of perfection.
Another is the decline of technology innovation in Japan.
Let me be clear. Japanese companies love talking about “technology innovation.” But they almost always define innovation as the “most advanced technology” they can develop by throwing around a lot of R&D money. They rarely talk about the innovation that opens and creates new markets. More to the point, Japan today appears almost incapable of the innovation necessary to reduce the cost of products and create fresh demand. The Japanese has forgotten this art. Samsung, in South Korea, has apparently inherited it.
These two realities are deeply intertwined. Casual Japan observers should notice that Japanese companies take great pride in the “high quality” of their products but they often fail to mention “at what cost.”
Let me explain what I mean by high quality vs. cost.