MANHASSET, N.Y. Under attack from lower-cost Asian competitors, Japan's fragmented electronics industry, must consolidate in order to achieve respectable profitability levels, analysts and industry executives said according to a Reuters report.
The report, compiled from the Reuters
Asia Technology and Telecoms Summit, noted that the operating profit margin of Japan's top 10 electronics makers in 2004 was a mere 2.8 percent on hundreds of billions of dollars of sales, and has been stuck at low levels for years.
Top executives quoted in the report conceded the meager results are not acceptable.
"In Japan we've taken it for granted, but profitability is not at a good level," Yasuo Nishiguchi, chief executive of Kyocera Corp., was quoted as saying.
"Ten percent is what companies should try to achieve. If you aim for 3 percent, you end up with 3 percent," he said.
Low profitability is due in large part to the move to digital products, which made it easier for new Chinese, Taiwanese and Korean rivals to compete, Herman de Haan, the head of Japan operations at Netherlands-based Philips Electronics, was quoted as saying.
"If I look at our TV manufacturing in 1981, we had 1,000 or 1,500 ladies in a factory,” de Haan reportedly said. “They had to make eight or 10 adjustments to make the set perfect. It was all fingers work. Having control of research, development and manufacturing gave a company a head start of one or two years," he added.
"Today, everybody can do it. The system is on the chip," de Hann said.
Japan, however, has too many electronics makers to compete effectively, Fumiaki Sato, an electronics industry analyst at Deutsche Bank in Tokyo, was quoted as saying.
He noted that 10 Japanese mobile phone makers, including electronics giants NEC Corp., Matsushita Electric Industrial Co., Sharp Corp., Toshiba Corp., and Hitachi Ltd., held a combined global market share of only 10 percent in the last business year, while none had more than 2 percent.
"Ten players are sharing a pie with a low level of productivity," he was quoted as saying.