2, 01. 2005
Yamanoi Norio
A trend toward relocating overseas Japanese manufacturing bases for competitive cutting-edge products, particularly those in the field of digital consumer products, back to Japan is making itself apparent. A sense of crisis of a hollowing out - that Japan was starting to lag behind China, South Korea and Taiwan not only in terms of price but also in innovative manufacturing techniques - began to arise and has aroused a new movement among manufacturers in Japan.
Accelerated Move towards the Manufacture of Components in Japan
Fuji Photo Film Co., Ltd. will be building a new plant in Japan for the manufacture of liquid crystal display (LCD) components. The company will be investing over 100 billion yen in one of the largest investments to be made for the production of liquid crystal related components. Fuji Film is aiming to make the plant operational sometime after 2006. Meanwhile, Sharp Corporation's cutting-edge liquid crystal panel plant in Kameyama City, Mie Prefecture has been in operation since January 2004, while Matsushita Electric Industrial Co., Ltd. is currently building a plasma display panel (PDP) plant in Amagasaki City, Hyogo Prefecture. In all three cases, domestic, rather than overseas manufacturing was judged to be more advantageous. This was because a manufacturing base located close to research facilities was desirable in order to keep up with the rapid pace at which the upgrading of cutting-edge products proceeds. Furthermore, this is a manufacturing sector in which automation has advanced and does not involve a great amount of labor costs.
Japan was a consumer electronics giant until the 1980s. Videocassette recorders (VCRs) and camcorders were mass produced and exported around the world, earning foreign currencies. This structure began to crumble, however, in the 1990s. The appreciation of the value of the yen made Japanese consumer electronics less cost competitive, and many manufacturing bases for products that were not very competitive were transferred to China and Southeast Asia where labor costs were low.
Although these relocations of plants to overseas locations were effective in terms of cost reduction, Japanese companies were unable to foresee that they would also result in the establishment of new consumer electronics companies by local engineers based on what they had learned or that these companies would grow to become their rivals.
Some of the world's largest consumer electronic companies - such as Matsushita and Sony Corporation - can still be found in Japan. However, the truth is that because of the competition they are facing by other companies in Asia, including China, they are unable to attain the kind of huge profits that they had marked in the past.
This situation, however, is starting to change for the better as a result of a major boom in digital consumer electronics. Although called a "boom," it is not something that will be short-lived. A major change is taking place, much as in the way that color television sets replaced black and white TVs and compact discs replaced records. Japanese consumer electronics manufacturers are beginning to recover their international competitiveness and are once again becoming major players
Ahead of Others in Storage Media
There are three major categories in digital consumer electronics, and there is attention being placed on Japanese manufacturers for their grip on related technology in each of the categories.
The first is display technology. Cathode-ray tubes (CRTs) for television and PC display use are on their way to being replaced by LCDs and PDPs, which are thinner and lighter. Although Japanese makers have been overtaken in the LCD field by Taiwanese and Korean manufacturers, it should be noted that the majority of the manufacturing equipment for LCD being used is of Japanese make, even in Korea and Taiwan. Meanwhile, Japan dominates more than a 90 percent share of the world market in PDP. Organic light emitting diode (OLED) displays (also known as electroluminescence display or OELD) is thought to be a potential post-LCD technology. Although OLED technology was developed with Eastman Kodak Co. at the center, only Japanese manufacturers have so far succeeded in mass production of OLED products.
The second category is storage technology. There is rapid growth being marked by DVD recorders (which utilize optical disk drives) and HDD recorders (which use hard disk drives) as a replacement of the VCR. Japan has led the world throughout in DVDs, from the development of basic technology to the establishment of standards. Good showing among Japanese companies in relation to HDDs are also highly visible, including the acquisition of IBM Corporation's HDD business by Hitachi, Ltd. Digital cameras are also closely related to storage technology.
The third category is digital communications technology. Japan is the only country in the world where the new-generation communications technologies of digital broadcasting, third generation (3G) mobile phones, and ADSL are in practical use. Because of this, products such as digital receivers, mobile phones capable of high-speed data transmissions, and ADSL modems, are the least expensive in the world while also boasting high quality.
Key Components Manufactured Domestically in Japan and Assembled in China
Mass production techniques were in the background of Japan's past world domination as a consumer electronics giant. Today, however, Chinese products have caught up in terms of performance, and Japanese products are at an overwhelming disadvantage in terms of price.
Japanese manufacturers developed digital technologies as a successor to its mass production techniques. It had been forecasted more than a dozen years ago that cathode-ray tubes would be eventually be replaced by flat-screen displays; that VCRs would be replaced by disks; and that transmission speeds would accelerate. Through the efforts of Japanese manufacturers, these next-generation technologies have finally been commercialized at prices that are within the consumer reach. The current digital home electronics boom can be said to have occurred as a result of this.
On top of this is the fact that unlike home appliances of the past, digital consumer electronics is a field that Japan will not be easily edged out of by overseas manufacturers. For example, while Chinese manufacturers also mass produce DVD players, these products cannot be assembled without the import of many of the key components from Japan. Therefore, it is a mechanism that will always bring a fixed return to Japanese companies. This is the basis for the outlook that the boom in digital consumer electronics will not end as a short-lived fad but will lead the Japanese economy over a long period of time.
The basic strategy for Japanese consumer electronics makers from now on will be to manufacture key components in Japan and assemble them in China. Canon Inc. blazed a trail in this sense.
Canon transferred its mass production plant for office equipment, such as copiers, to China early on and succeeded in securing profits. Key components are either manufactured in Japan or procured from other makers. The company will be taking this strategy further by increasing the proportion of key components that are manufactured in-house. There are many other companies that are focusing their domestic plants to the manufacture of key components. This is not a strategy to "overcome" China, but rather a strategy to prevent handing everything over to China.
However, companies are recently starting to go one step further. That is, this strategic move is now taking on the light of maintaining innovative manufacturing technologies. A domestic production plant makes it possible to manufacture a product in tandem with development, and it also makes it easier to produce critical components and manufacturing equipment in-house. It also enables the promotion of streamlining by centralizing the dispersed production sites both within and outside Japan. The other side of the coin is that companies are starting to think that over-dependence on overseas manufacturing could potentially lead to the loss of the competitive edge in development, something that is really essential, even in a field like digital consumer electronics products. One can see the direction that Japanese manufacturing will be taking in the future through this trend towards a return of manufacturing bases to Japan.
