CES 2013: make or break for Japanese giants
THE global future of Japan's biggest brands will be shaped this week in Las Vegas - and it's not looking very good.
At the annual Consumer Electronics Show, Panasonic, Sony and Sharp will all try to convince analysts and consumers alike that they're really able to compete with Samsung and Apple, and that they won't be thoroughly usurped by the apparently unstoppable march of Chinese brands such as Huawei.
Between them, the three Japanese companies have racked up losses of more than 1.6trillion yen ($19bn; £12bn) this fiscal year alone. Worst placed is Sharp, which concedes there is "material doubt" that it can survive alone, and is not an attractive target for its competitors either. Last financial year it lost 376bn yen, and this year it may increase that to 450bn. Investments from iPhone-manufacturer Foxconn have been troubled by Sharp's plunging share price and its bonds' status has been cut to junk.
Panasonic is arguably in the best position of the three as it tries to reposition itself as a business founded on eco-credentials. It's not only making well-received televisions but also providing the solar panels across the enormous Blackfriars Station roof spanning the Thames and turning its power generation expertise to the potentially lucrative consumer market. Nonetheless, even it has reported record-breaking losses of £6.5bn in 2011. The most optimistic thing its outgoing president, Fumio Ohtsubo, has been able to say about the brand's television business is that "Panasonic's TVs may one day be a case study of a recovery."
It's television panels that have proved a drag on all three companies, and for Sony in particular. Despite being the world's most profitable film studio, and putting Sony products relentlessly into the hands of screen stars such as James Bond and Spiderman, Sony has not managed to turn product placement into profit. Appointed in January, new chief executive Kazuo Hirai told a reporter when he took over that his response to the scale of the challenge was simple: "holy s***. What now?'
Indeed, Sony is the totemic company upon which many believe the hopes of all Japan still rest. Hirai has already improved its financial position somewhat, and is widely expected to use CES to focus on the launch of a smartphone that one executive has already claimed "will rival the iPhone". The chatter among technology bloggers has been positive: leaked pictures, suggested one, prove that Sony can still design beautiful products. Using the Android operating system, which thanks to the support of makers Google is already dominant and still gaining momentum, means Sony is jumping on an attractive if fast-moving bandwagon.
But precisely what Sony unveils at 5pm at the Las Vegas Convention Centre will be crucial. Last year, it had only just ended the Sony Ericsson mobile phone tie-up, so 2013 marks its first serious solo foray into the world's most important market. Later this year it is likely to unveil as successor to the PlayStation 3, but that may not hit shops until 2014. If Sony's not to decline further, it needs to make progress now, and it also needs to combine its assets more effectively.
Japanese politicians claim that so long as debt remains cheap, the apparently parlous positions of their flagship brands is sustainable. But the high yen continues to be unhelpful, and could yet worsen the situation further by allowing other companies to cash in.
Ben Wood, chief of research at analysts CCS Insight, agrees. "The heady days of Japanese companies dominating the global consumer electronics market are a distant memory, and as the Japanese population experiences its biggest drop in history, the home market is no longer enough: consistent international success is vital to the future health of the Japanese economy. Sony will need to put on a dazzling show and prove to the world that it can use all its assets to help seize some of the initiative back from its Korean rivals."
There is a case study for Japanese recovery, at least: Hitachi turned itself around after recording breaking, £6billion losses in 2009. With 75,000 redundancies, it concentrated on a series of new technologies. For Sony, Sharp and Panasonic, the equivalent is likely to be new, ultra high definition television. But it may well be a struggle: according to analysts NPD DisplaySearch, the new screens may be four times as sharp of plain old HD, but they will make up just one in every 50 TVs sold by 2017.
By Matt Warman Telegraph.co.uk