March 08 Beacon
CE Industry Under Reorganization
Global Markets...or Global Migraines?
<MARCH 5, 2008><TOKYO/NIKKEI>According to a report from the Nikkei, Japan's consumer electronics makers are, in many cases, undergoing a major reorganization as resources are shifted and whole divisions are shut down to exit unprofitable businesses. As global markets slow down, competition rachets up several notches making some segments less attractive to companies.
For example, Pioneer is expected to withdraw from manufacturing plasma panels this year. Once an area considered a core competency, Pioneer will continue to sell plasma TV sets using panels purchased from Matsushita Electric Industrial Co. At one time an industry leader in this business, Pioneer downgraded their forecast this year of selling 720,000 units to only 480,000 and expects to report an operating loss of approximately $192 million.
Like Pioneer, Mitsubishi Electric was a leader in the cell phone business at one time. Yet on Monday, they announced that they would stop making cellular phones. These companies, and many more, are facing difficult realities in the global marketplace. The ultra competitive nature of markets such as cellular telephones and flat panel televisions are forcing consolidations and new operating partnerships as companies seek new roads to success.
Video has gone through a particularly dramatic transformation. Companies competed with televisions that were vertically produced - manufacturers built the entire set from the ground up...including the picture tube (Sony's Trinitron was a source of competitive advantage). However, flat panel TVs changed the dynamics as other Asian manufacturers, particularly Taiwanese companies, focused on producing the core panels and selling them as a commodity to branded manufacturers for use in their products.
Ultimately, all brands were buying from these companies and attempting to find ways to differentiate themselves...with varying degrees of success. This changing landscape has caused a series of partnerships like those recently pursued by Sony and Samsung and Sony and Sharp.
Finally, the Nikkei says that those manufacturers who fought aggressively in the local market often placed themselves at a disadvantage in global markets as locally targeted products were not competitive on the world market. This has driven Sony, for example, to launch a joint venture with Ericsson to pursue success in the global cell phone business. Companies must continue to find these types of alliances in order to survive in the global market.