Who recovers first? Panasonic, Sony or Sharp?

PARIS -- Recent reports from Japan on new CEOs at Japan’s two consumer electronics behemoths – Sony Corp. and Panasonic Corp. – should make you feel both hopeful and weary at the same time.

Well, at least that’s how I feel.

Sony’s Kazuo Hirai and Panasonic’s Kazuhiro Tsuga are both in their 50’s -- relatively young according to the Japanese corporate norm.

They’re both U.S.-educated; and they are refreshingly outspoken compared to traditional Japanese executives who, faced with a tough question, tend to suck their teeth and mutter something like: “Well… that’s under study.”

Before ascending to the head of their companies earlier this year, both executives most recently led their respective TV business units, both of which are historically considered as the “core” business of the CE giants.

Now, Japan’s media and the financial community appear hell bent on the new theory that whichever company can say sayonara to its TV unit faster will win their trust and more swiftly recover from a plague of record losses.


If this were indeed a race about who abandons the TV business faster, Panasonic’s Tsuga appears to be already a winner in the court of public opinions.

Bloomberg, earlier this week, reported that “Panasonic’s Tsuga built an ‘outstanding’ reputation for making reforms while running the audiovisual unit.’ It was quoting Masahiro Ono, a Tokyo-based analyst at Morgan Stanley MUFG Securities Co.

The Bloomberg story went on, “Panasonic also conceded making mistakes by investing too heavily in TV panels, unlike Hirai, who hasn’t criticized Sony’s past errors.” In contrast, “Hirai has never come out and said what’s wrong at Sony,” said the report, quoting Ono.

Indeed, there is some anecdotal evidence that Panasonic’s new CEO may be a lot more direct and less politically correct than Sony’s Hirai.

Nikkei, for example, Friday reported: “[Panasonic’s] Tsuga earned a reputation as bold decision maker as head of the company's money-losing TV unit. Soon after he took over the unit in April of last year, he had Panasonic sets and rival brands installed in his home to compare them from the consumer's viewpoint.

“He moved quickly to restructure the unit's operations, shuttering a state-of-the-art plasma display plant, for example, untroubled by the symbolic value of the TV business. That helped Tsuga restore the unit's profitability.”

In his first press conference as CEO on Thursday, Tsuga spoke about problems at the company, which reported a record net loss of 772.1 billion yen for the year through March, and the steps needed to fix them. Nikkei quoted Tsuga: "TVs are already a type of white good,"
referring to commoditized home appliances. "We need to reduce internal busywork and focus on customer needs."

Now, I did like this comment by Tsuga.

Comparing the TV unit – once a sacred cow – with refrigerators and washing machines is a clear admission on the part of the new CEO that Panasonic will no longer make their own TVs in Japan. Most of their refrigerators and washing machines have long been made in Southeast Asia.

But here’s the thing.

I don’t care if Japanese CE companies unload their TV units. I care even less who ditches TV faster. However, I do care about the absence of a clear path defined by these CE giants to restore their profitability in the medium to long term.

Panasonic now has a new “post-TV” slogan: "Eco and Smart" coined by the new CEO to promote a comprehensive smart energy management policy that “incorporates created energy, stored energy and saved energy.”

Well, you may get the drift that Panasonic is interested in pursuing solar technology; developing and selling smart energy management systems (that can go into every home at a higher margin, for example).
But you’ve got to admit that this is still too vague to call it a winning business plan at this point.

Meanwhile, Sony’s Hirai is on record saying that Sony will shift its focus to "three core pillars" -- digital imaging, gaming, and the mobile market. Hirai, however, has been silent on the key question as to where Sony’s TV business fits into the whole picture.


Amidst of all this non-TV, post-TV discussion in Japan, incidentally, I believe the Japanese company with the most foresight is neither Panasonic led by Tsuga nor Sony led by Hirai.

In my opinion, it’s Sharp.

One may argue that Sharp had no choice but sell its shares (and soul) to Terry Gou, the founder of Hon Hai (also commonly known as Foxconn), in order to fight for survival. Some even criticize this action as paving the way to Sharp eventually becoming a Taiwanese company.

That, however, is truly a short-sighted view.

When the market and the economy are truly becoming global, where the scale and the cost do matter, a single Japanese company – no matter how big -- can’t go it alone. Sharp – among all the Japanese electronics manufacturers – took the first step to embrace that hard reality.

Of course, many say Gou was able to talk Sharp into the deal because the partnership between Taiwan’s EMS giant and Sharp is the only way to go head-to-head against Samsung and eventually win the battle in the global flat-panel screen market. In fact, I heard similar talk – “Japan needs to partner with China in order to beat Korean” – often while traveling in China earlier this month.

Whatever the motive, though, it’s clear that the survival of Japanese consumer electronics manufacturers hinges on the flexibility of Japanese executives. The practice of seeking partnerships or joint ventures only among Japanese companies (i.e. Sony and Panasonic to develop the next generation OLED panels for TVs) is not the recipe for survival. Protecting home-grown IPs is one thing. But Japan must spread its wings to look beyond the border to seek partners or buyers of IPs.


Related stories:

Sony, Panasonic join hands to print OLED displays

Sharp to transfer LCD technology to Hon Hai’s China plant

Will Japan Inc. say sayonara to TV manufacturing?

Sony pride turns to disillusionment