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too comfortable with their wealth), non-existent global perspectives, Japan’s stubborn lack of fluency in English, outdated industrial policies driven by elite bureaucrats, slow decision-making process (or their skills in making no decisions at all), and perhaps most important, a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.
I owned Samsung phone may years ago, and I hated the quality of it. I have never bought a Samsung product again.
I have owned Sony products, Apple products, japanese cars etc. I do love the things that last. I owned apple phones for many years, never had a issue with it. I don't mind paying a few extra bucks for peace of mind,
I worked in Nihon TI in the 90's making DRAM. We had a development JV with Hitachi. For sure Hitachi had a very hierarchical management structure, and initiative by engineers was not really encouraged. Hitachi had a lot of money and state-of-the-art equipment then. I don't think it was possible for Hitachi or any of the Japanese DRAM makers to compete with Samsung after the asian financial crisis of '97. The Korean won was so cheap there was no way that Japanese manufacturing could compete. For sure the Japanese culture of avoiding risk and change at the time hurt very badly. The giant paternal Japanese corporation was a good thing when it allowed long-term investment to happen. It was a bad thing when the corporate inertia prevented the radical changes necessary for them to continue to thrive.
Dunno, I continue to think that too much is being made of past popular myths. What made Japanese CE and auto companies famous, in the 1970s and 1980s, was production of good quality mass market products. Emphasis on "mass market." Not true innovation, and not state-of-the-art design either. But the products tended to work well at their intended functions, because they were conservatively designed and well screwed together.
In the popular culture, this might become blown out of proportion. Which is why laymen might have thought of Sony or Honda as producing something spectacular. And the popular myth takes on a life of its own. But it's still a myth.
While I agree that spending too much on "quality" might price a company out of competition, it's not entirely clear to me that this is the major effect going on here.
The emphasis was on "mass market" products, from Japan Inc. But that "mass market" always demands the lowest possible production costs. And that's why this manufacturing has migrated to Korea, to China, and I'm thinking eventually to India and perhaps Africa? when the quality of life rises, so do those production costs.
Japan might have to reinvent itself, like Germany, as the producer of what the popular culture will accept as being luxury items.
Could the reason be "Plaza Accord"? http://en.wikipedia.org/wiki/Plaza_Accord
Now the new PM wants to devalue Yen. I am looking forward to buying a Lexus when it becomes cheaper than a Hyndai. The quality is no comparison :-)
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