Japan's electronics manufacturers: "mono zukuri"

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Japan's electronics manufacturers combined are about as large as the Netherlands economically and are facing a period of restructuring, while at the same time they acquire companies abroad in an …

Japan's electronics manufacturers combined are about as large as the Netherlands economically and are facing a period of restructuring, while at the same time they acquire companies abroad in an effort to globalize. Japan's electronic component sector occupies about 30% - 40% of the global electronic devices market, and are generally better positioned than Japan's electrical conglomerates, although these also face their own challanges. The report reviews and analyses Japan's top 8 electrical companies, and Japan's top 7 electronic component makers, as well as several related companies, and an analysis of the industry sectors. Subscribe to receive regular updates.

The report is a companion to our interview series on CNBC and BBC

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  • 1. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S ELECTRONICS MANUFACTURERS “MONO ZUKURI” 22nd Edition,August 8, 2013 by Gerhard Fasol, PhD, Eurotechnology Japan KK http://www.eurotechnology.com/ fasol@eurotechnology.com This is an outline/preview version - please purchase and download latest version of the full report here: http://www.eurotechnology.com/store/j_electrical/ 1
  • 2. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S ELECTRONICS MANUFACTURERS -VERSIONS 2 Subscribe to this report, and we will regularly send you the latest versions regularly. subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU76634120266 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU20943117748 Version Date Changes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 February 19, 2009 March 17, 2009 March 22, 2009 March 23, 2009 July 3, 2009 July 4, 2009 July 5, 2009 July 10, 2009 January 18, 2011 October 1, 2012 November 13, 2012 November 15, 2012 November 18, 2012 January 4, 2013 January 28, 2013 document management companies: Ricoh and XEROX
  • 3. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S ELECTRONICS MANUFACTURERS -VERSIONS 3 Subscribe to this report, and we will regularly send you the latest versions regularly. subscription, monthly payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU76634120266 subscription, annual payment, you can end the subscription any time (no refunds): http://store.eSellerate.net/s.asp?s=STR0576176470&Cmd=BUY&SKURefnum=SKU20943117748 Version Date Changes 18 19 20 21 22 May 9, 2013 SONY updated, financial results updated May 16, 2013 FY2012 data for Big-8 electronics makers added May 18, 2013 Analysis added August 4, 2103 Analysis added
  • 4. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 LICENSE Thank you for purchasing licenses to our reports, and for your cooperation with our licensing conditions. Only through your purchases can we continue to produce high-quality market reports from Japan INTHE CASE OF SINGLE LICENSE: If you have purchased a single copy license of this report, you are not permitted to copy this report except for a single back-up copy INTHE CASE OF CORPORATE LICENSE: in the case that your company has purchased a corporate license, you may distribute this report inside your company including protected corporate information servers locked to the outside, but you cannot distribute this report outside your company ANNUAL SUBSCRIPTION: we offer annual subscriptions for a particular report, and also for all our reports in one single transaction at a great discount - please contact us for details. Corporations subscribing will receive all updates at the time of publication, so that you can be sure to have the latest up-to-date information This research report comes without any warranty of any kind.The authors and Eurotechnology Japan K. K. do not warrant that the information in this report is without error, nor that the information serves any particular purpose. For legal advice please consult properly licensed legal professionals, for investment advice please consult properly licensed financial advisors.Trademarks mentioned are the property of their owners. Eurotechnology is a trademark or registered trademark in Japan and other countries. 4
  • 5. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 EXECUTIVE SUMMARY: JAPAN’S ELECTRONICS MANUFACTURERS 5 Japan’s “Big 8” electronics companies (Hitachi, Panasonic, SONY, Sharp,Toshiba, Mitsubishi Electric, Fujitsu, NEC) combined have about US$ 600 Billion in revenues (sales), of similar economic size as the Netherlands, and have an important position in the global economy. Especially SONY is often described as “iconic”. While these companies were dominating global markets in the 1980-1990s, during the last 15 years they have not grown, and their combined total profits over the last 15 years has been approximately zero. While these companies still file very large numbers of patents, produced very important products, and their components are important for global supply chains, possess important technology, for a combination of factors, they have not succeeded to achieve their potential. Recently, the financial position of SONY, Sharp and Panasonic have deteriorated substantially, and Sharp management has announced that the survival of the company is in danger. Overall these companies present extraordinary opportunities for improvement of performance. The second part of this report focuses on Japan’s top 7 electronic component makers (Murata, Kyocera,TDK,Alps Electronics, Nidec, Nitto Denko, Rohm).The financial position (growth and profits) of this group of companies is better positioned, they represent about 30%-40% of the global component market, which grows at 10% / year.The global electronics components market is estimated at around US$ 140-170 billion in 2012 and growing at an annual rate of around 10% to US$ 220 billion in 2017. However margins of Japan’s electronic component makers are overall declining, indicating that change of business model is necessary. Japan’s electrical companies embrace and celebrate “mono zukuri” (= craftsmanship, making things, the art of making things) as their core virtue.They emphasize manufacturing perfection as a competitive advantage.
  • 6. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S ELECTRICAL INDUSTRIES 6 This report focuses on 15 companies (plus a few other companies, such as Nintendo and Canon) (numbers in brackets are the code numbers at theTokyo Stock Exchange): •Japan’s 8 major consumer electronics makers •Hitachi Seisakusho (6501) •Panasonic (6752) •SONY (6758) •Mitsubishi Electric (6503) •Sharp (6753) •Toshiba (6502) •Fujitsu (6702) •NEC (6701) •Japan’s 7 major electronics component makers •Murata (6981) •Kyocera (6971) •TDK (6762) •Alps Electronics (6770) •Nidec (6594) •Nitto Denko (6988) •Rohm (6963)
  • 7. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 AGENDA - LIST OF CONTENTS 7 •Executive summary •“mono zukuri” (= making things) as a philosophy and business model •Branding •“Galapagos effect”, Japan-Focus vs. globalization, and business model issues •Keiretsu industrial family bonds •Japan’s 8 major consumer electronics manufacturers •Industry sector overview, financial analysis and trends •Company overview and analysis •Hitachi •Panasonic •SONY •Mitsubishi Electric •Sharp •Toshiba •Fujitsu •NEC •Japan’s 7 major electronic component makers •Industry sector overview, financial analysis and trends •Company overviews and analysis •Murata •Kyocera •TDK •Alps Electronics •Nidec •Nitto Denko •Rohm •Other companies covered in this report •Nintendo •Canon, RICOH •Oki •Citizen •Summary
  • 8. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 “MONO ZUKURI”= THE ART OF MAKINGTHINGS 8
  • 9. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 “MONO ZUKURI” = MAKINGTHINGS 9 •Japan’s electrical companies define themselves as manufacturing companies •Their DNA is “mono zukuri” = making things, with the meaning of manufacturing perfection •In fact, there is more change than expected recently, partially driven by crisis: •US investment fundThird Point, lead by Daniel Loeb, becomes largest share holder of SONY and pushes for change and divestures at SONY •SHARP’s investment in the large new Sakai-FPD factory goes sour, due to SHARP’s miscalculation of global demand for large sizeTVs and displays •Panasonic falls into big losses •Rapid growth of Nichia Chemical Industries (not normally counted as an electrical company – however the products overlap much). See http://www.eurotechnology.com/store/solidstatelighting/ for an overview •Acquisition of SANYO by Panasonic •Rapid growth of Nintendo, followed by profit decline due to the competition from smart-phone based games •Sale of the hard disk division by Fujitsu toToshiba (after long delays) •Finally, a resolution of Panasonic’s difficult branding situation (abandoning the Matsushita and National brands)
  • 10. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S ELECTRICAL CONGLOMERATES NEED A CHANGE OF BUSINESS MODEL 10
  • 11. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 GLOBALIZATIONVS JAPAN’S “GALAPAGOS EFFECT” 15
  • 12. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S “GALAPAGOS EFFECT” 16 “Galapagos effect” is a term which has been used since about 2005 even by Japanese Government to describe a situation, where Japanese companies develop new technologies, and bring new services and business models to Japan’s market, but fail to capture global value. The term “Galapagos effect” is often used to characterize Japan’s pioneering development of mobile internet and mobile internet phones starting with DoCoMo’s i-Mode in 1999, while Japanese mobile phone handset makers failed to capture global market share. Another similar example is electronic money and mobile payments, which Japan introduced much earlier than other countries, but where Japanese companies failed to make global impact or capture global value. Recently this term is used much more broadly in many areas, and is also used to characterize the current crisis of Japan’s electronics industry, especially SONY, SHARP and Panasonic.
  • 13. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 REASONS FOR JAPAN’S “GALAPAGOS EFFECT” 17 Reasons for Japan’s “Galapagos effect” include: •Domestic Japanese companies focused on Japan only:“created by Japan, for Japan and of Japan, and Japan is the crux of the issue” (JunkoYoshida, Journalist for EE-Times about Renesas and Renesas-Mobile in the article entitled “Free Renesas from its golden cage called Japan”) •(Temporarily) protected markets in Japan. e.g. Japanese mobile phone makers were almost exclusive suppliers to Japan’s mobile phone operators. Missed the paradigm shift from “Galapagos Keitai” (= Galakei) feature phones (using mainly Nokia’s Symbian OS) to smart phones (iPhone and Android phones). Missed opportunities to grow business outside Japan. •Lack of focus. Japanese electrical makers are spread very thinly over very many business areas at very low or zero margins, and do not achieve global impact on any. •Lack of diversity. Boards, management and employees are almost exclusively Japanese, therefore cannot understand markets outside Japan in depth, and therefore miss important market trends, such as smart phones. Lack of diversity reduces creativity and management quality. IMD President DominiqueTurpin said “You can argue that the strength of Japanese culture, in terms of homogeneity, is also a weakness”
  • 14. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 GLOBALIZATION RATIOS RANGE FROM 11%TO 86% 18 Leaders Nintendo & Canon and Mitsubishi Electrical are almost opposite: Nintendo achieves 88.5% of sales outside Japan, Canon 79%, while Mitsubishi Electric with only 14% international sales is essentially a domestic Japanese company 0 10 20 30 40 50 60 70 80 90 100 Japansalesvsglobalsales c2009EurotechnologyJapanKK www.eurotechnology.com Nintendo 11 Canon 21 Sony 23 Sanyo 37 ROHM 37 Kyocera 39 Sharp 47 Toshiba48 Panasonic 50 Hitachi 58 Fujitsu 64 OKI 71 NEC 79 MitsubishiElectric 86 Japan sales Rest of World Overseas sales of Japan's electrical companies , data of FY 2009
  • 15. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 19 see: http://accjjournal.com/the-galapagos-effect/
  • 16. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 20 see: http://accjjournal.com/the-galapagos-effect/
  • 17. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 RESULTS OFTHE GALAPAGOS WORKING GROUP 21 Recommendations to: 1. telecom operators 2. equipment makers 3. content companies Critical factors for success: 1. people and diversity 2. focus (restructuring) 3. international from day 1 4. speed
  • 18. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 THE KEIRETSU FAMILY BONDS NEEDTO RELAX WITH HISTORY - BUT KEEPTHE GOOD PARTS 23
  • 19. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 BRAND 25
  • 20. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S “BIG-8” ELECTRONICS MANUFACTURERS 28
  • 21. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 201329 •Japan’s “Big-8” electronics manufacturers combined have about US$ 450 billion in sales, similar in size to the economy of the Netherlands. •Hitachi •Panasonic •SONY •Mitsubishi Electric •Sharp •Toshiba •Fujitsu •NEC •Combined, the “big 8” electronics companies have •revenues = ¥ 42,444.3 billion (US$ 414 billion) •net losses = ¥-909 billion (US$ -8.9 bill) •combined market cap = ¥ 14,732 billion (US$ 144 billion) (compare to:Apple’s market cap of US$ 410 Billion, and GE’s market cap of US$ 240 Billion). JAPAN’S “BIG-8” CONSUMER ELECTRONICS MAKERS
  • 22. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 201330 JAPAN’S “BIG-8” ELECTRONIC MANUFACTURERS (FY 2012) Keiretsu affiliation Tokyo Stock Exchange Code FY 2012 sales (ends March 31, 2013) FY2012 net profit (ends March 31, 2013) market cap (May 15, 2013) Hitachi Panasonic SONY Mitsubishi Electric Sharp Toshiba Fujitsu NEC Total Fuyou Group (Mizuho) 6501 ¥ 9041.071 billion ¥ 237.721 billion ¥ 3572 billion 6752 ¥ 7303.0 billion ¥ -754.3 billion ¥ 2203 billion 6758 ¥ 6800.9 billion ¥ 43.0 billion ¥ 2097 billion Mitsubishi MitsubishiTokyo UFJ 6503 ¥ 3567.184 billion ¥ 74.650 billion ¥ 2534 billion Sanwa MitsubishiTokyo UFJ 6753 ¥ 2478.5 billion ¥ -545.3 billion ¥ 545 billion Mitsui Mitsui Sumitomo 6502 ¥ 5800.3 billion ¥ 77.5 billion ¥ 2216 billion Dai-Ichi Kangin Mizuho 6702 ¥ 4381.7 billion ¥ -72.9 billion ¥ 888 billion Sumitomo Mitsui Sumitomo 6701 ¥ 3071.6 billion ¥ 30.4 billion ¥ 677 billion ¥ 42,444.3 billion (US$ 414 billion) ¥-909 billion (US$ -8.9 bill) ¥ 14,732 billion (US$ 144 billion)
  • 23. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S 8 MAJOR CONSUMER ELECTRONICS MAKERS 34 Japan’s top 8 electrical groups combined in their best year recently have achieved operational income of US$ 25 billion. 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1000 500 0 500 1000 1500 2000 2500 3000 operatingincomeYENbillion Japan's 8 electronics manufacturers annual operating income US$ 10 billion US$ 10 billion US$ 20 billion US$ 30 billion Hitachi Panasonic Sony Mitsubishi Electric Sharp Toshiba Fujitsu NEC c2013EurotechnologyJapanKK www.eurotechnology.com
  • 24. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 HITACHI SLOGAN:“INSPIRETHE NEXT” 42
  • 25. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 201343 HITACHI Hitachi = named after Hitachi town, where the company was founded. part of the historic Dai-Ichi Kangin keiretsu Founded Founder Headquarters Stock Exchange Consolidated sales Number of employees Major share holders Major business areas 1910 by Namihei Odaira as a repair shop, and to produce Japan’s first electrical motors Namihei Odaira Chiyoda-ku,Tokyo TokyoTSE 6501 YEN 9,665.8 Billion (US$ 122 Billion) (FY2011, ended March 31, 2012) 323,540, consolidated (March 2012) industrial infrastructure.Trains, power stations, medical equipment.
  • 26. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 201354 In the past Hitachi only compared it’s performance with other Japanese companies. Only now, 2011/2012 did Hitachi start benchmarking with the best global companies: This figure compares the annual net margin for GE, Siemens, Hitachi and Panasonic. GE’s net margin is consistently between 10%-15% (except for the 2-3 years after the Lehman shock), while SIEMENS’ net margin climbed from 2-3% to the 5-10% range. Hitachi and Panasonic however, for the 15 year period 1998-2012 had average negative margins, while Hitachi’s margin in the last two years climbed close to 3%, still substantially lower than GE’s 10-15%. HITACHI BENCHMARKING 1998 2000 2002 2004 2006 2008 2010 2012 2014 15 10 5 0 5 10 15 20 annualnetmargin Siemens GE Hitachi Panasonic Annual net margins c2012EurotechnologyJapanKK www.eurotechnology.com
  • 27. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 PANASONIC SLOGAN:“IDEAS FOR LIFE” 55
  • 28. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SANYO, NOW PART OF PANASONIC SLOGAN:“THINK GAYA” 63
  • 29. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SANYO’S SOLAR ARC, NOW PANASONIC SOLAR ARC 67 •Sanyo’s Solar Ark has 5046 single crystal solar cell battery panels, achieves up to 630kW of solar power output and delivers about 530,000 kWh of energy per year.The Solar Ark is about 315m long and weighs 3000 tons. •Corresponds to a CO2 reduction of 95 tons-C/year •You can see Sanyo’s Solar Arc from theTokaido-Shinkansen line, if you are seated on the right hand side of the train between Kyoto and Nagoya station, when taking theTokaido Shinkansen fromTokyo to Osaka (or left hand side seat when traveling from Osaka toTokyo).
  • 30. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 MITSUBISHI ELECTRIC SLOGAN:“CHANGES FORTHE BETTER” 68
  • 31. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SHARP FOUNDERTOKUJI HAYAKAWA: “MAKE PRODUCTSTHAT OTHERS WANTTO IMITATE” 72
  • 32. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 TOSHIBA SLOGANS: JAPAN:“LEADING INNOVATION” GLOBAL:“COMMITTEDTO PEOPLE. COMMITTEDTOTHE FUTURE” 82
  • 33. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 FUJITSU SLOGAN:“THE POSSIBILITIES ARE INFINITE” 87
  • 34. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 NEC SLOGAN:“EMPOWERED BY INNOVATION” 91
  • 35. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SONY SLOGAN:“SONY. LIKE NO OTHER.” 97
  • 36. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SONY: MARGIN 104 •SONY’s operating margins have been steadily declining since SONY’s “better times” where stellar products including Walkman andTrinitronTV’s contributed to high margins •Margins averaged over the period FY1998-FY2012 are: •average operating margin = 2.3% •average net margin = 0.5% 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 10 8 6 4 2 0 2 4 6 8 10 annualoperatingandnetmargin Annual operating and net margin SONY mean operating margin 2.3 mean net margin 0.5 c2013EurotechnologyJapanKK www.eurotechnology.com
  • 37. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SONY: REVENUES BY SEGMENT 105 •As of financial year FY2012 (ended March 31, 2013) SONY reorganized the company segments from 5 segments (consumer products & services/CPS, professional devices & solutions/PDS, pictures, music, financial services) to 8 segments (pictures, music, financial services, mobile/MP&C, imaging products/IP&S, game, home entertainment & sound/HE&S, Devices). Each of these 8 segments is approx. US$10 Billion in sales/revenues. 2009 2010 2011 2012 2013 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000revenuesBillionYEN SONY revenues by segment Billion YEN years are Financial Years ending March 31 consumer products & services CPS professional devices, solutions PDS pictures movies music financial services other pictures music financial Mobile MP&C other Imaging Products IP&S game Home Entertainment and Sound HE&S Devices c2013EurotechnologyJapanKK www.eurotechnology.com
  • 38. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S 7 MAJOR ELECTRONIC COMPONENTS MAKERS 107
  • 39. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S 7 MAJOR ELECTRONIC COMPONENTS MAKERS 108 While Japan’s electrical groups largely face financial difficulties, low market capitalization, and are faced with the need of restructuring and search for new business models, Japan’s major electronic component makers (with the exception of ROHM) are generally in a much better situation. One major reason for the much better position of Japan’s electronic component makers, is that the component makers typically have a much more focused business model.They focus on a segment of devices, e.g. ceramic capacitors in the case of Murata, and aim to achieve a very high global market share and high margins in their chosen segment. While Japan’s top 8 electrical groups in total represent about US$ 600 Billion/year in sales, the top 7 electronic parts makers represent a smaller industry sector, in total approx. US$ 60 billion/year in sales. In this section we focus on the top 7 electronic parts makers (numbers in brackets are theTokyo Stock Exchange codes): •Murata (6981) •Kyocera (6971) •TDK (6762) •Alps Electronics (6770) •Nidec (6594) •Nitto Denko (6988) •Rohm (6963)
  • 40. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 JAPAN’S STRENGTH IN HIGHTECH PRODUCTS 111 Product global market share specialized electronic components production equipment for semiconductors NiMH batteries (Panasonic) micro controllers (Renesas) power steering (Mitsubishi Electric) Brush DC motors (Mabuchi) HDD motors (Nidec) Camera shutters (Nikon) Ceramic condensers 400nm lasers Carbon fiber Ceramic capacitors, Filters/Oscillators (Murata) Endoscopes (Olympus) 40% 60% 84% 50% 70% 86% 70% 70% 75% 100% 65% 35% - 70% 80%
  • 41. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 MURATA “INNOVATOR IN ELECTRONICS” “THE WORLD’S NO. 1 SUPPLIER OF PASSIVE ELECTRONIC COMPONENTS” 125
  • 42. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 MURATA HEAD QUARTERS BUILDING IN KYOTO 126
  • 43. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 KYOCERA = KYOTO CERAMICS SLOGAN:THE NEWVALUE FRONTIER MOTTO:“RESPECTTHE DEVINE AND LOVE PEOPLE 131
  • 44. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 KAZUO INAMORI FOUNDER OF KYOCERA 132 •born January 30, 1932 •1955 graduated from Kagoshima University with B.Sc. in Applied Chemistry •April 1, 1959 founded Kyoto Ceramics •1984 founded DDI, today part of KDDI •1984 founded Inamori Foundation which awards the Kyoto Prize •2010 CEO of Japan Airlines, turns around Japan Airlines after bankruptcy
  • 45. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 KYOCERA: REVENUES AND INCOME 137 •Kyocera is affected by the financial / economic crisis, however managed so far to remain profitable 1998 2000 2002 2004 2006 2008 2010 2012 2014 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 annualrevenueYENBillion US$ 2 Bill. US$ 4 Bill. US$ 6 Bill. US$ 8 Bill. US$ 10 Bill. US$ 12 Bill. US$ 14 Bill. US$ 16 Bill. Annual revenues of Kyocera c2012EurotechnologyJapanKK www.eurotechnology.com 1998 2000 2002 2004 2006 2008 2010 2012 2014 0 100 200 300 annualoperatingnet incomeYENBillion US$ 1 Bill. US$ 2 Bill. US$ 3 Bill. Annual operating and net income Kyocera c2012EurotechnologyJapanKK www.eurotechnology.com
  • 46. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 TDK (+ EPCOS) “CONTRIBUTETO CULTURE AND INDUSTRYTHROUGH CREATIVITY” 141
  • 47. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 ALPS “PERFECTINGTHE ART OF ELECTRONICS” 146
  • 48. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 NIDEC MOTTO:ALL FOR DREAMS “FOR EVERYTHINGTHAT SPINS AND MOVES” “AIMINGTO BETHE WORLD’S NUMBER 1 MANUFACTURER OF COMPREHENSIVE DRIVE TECHNOLOGY” 150
  • 49. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 NITTO DENKO “ALWAYS ONE STEP AHEAD IN MAKING GOODTHINGS HAPPEN WITH SHEETS AND FILMS” 154
  • 50. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 ROHM 160
  • 51. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 OTHER ELECTRICAL COMPANIES COVERED INTHIS REPORT 165
  • 52. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 IMAGING AND DOCUMENT MANAGEMENT COMPANIES 166
  • 53. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013167 •This section compares Japan’s top imaging and document management companies.These are: •Canon •RICOH •Fuji-Xerox •While the traditional photo-copying business is dropping, CANON has several business segments based on imaging. •Fuji-Xerox is the longest standing and successful joint-venture between an US and a Japanese company. •In this section we focus on comparing Canon, RICOH and XEROX. •We will expand this section in future editions of this report. Please subscribe to be sure to receive updates of this report. JAPAN’STOP IMAGING AND DOCUMENT MANAGEMENT COMPANIES: CANON, RICOH COMPAREDTO XEROX
  • 54. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 CANON 168
  • 55. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 RICOH 173
  • 56. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 COMPARING CANON, RICOH AND XEROX 177
  • 57. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 NINTENDO 182 For a detailed report on Nintendo and Japan’s game sector see: http://www.eurotechnology.com/jgames/
  • 58. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 OKI ELECTRIC INDUSTRIES SLOGAN: OPEN UPYOUR DREAMS 190
  • 59. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 CITIZEN “MICRO HUMANTECH” 196
  • 60. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SUMMARY 200
  • 61. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 SUMMARY: JAPAN’S ELECTRICAL MANUFACTURERS 201 Japan’s “Big-8” electrical companies (Hitachi, Panasonic, SONY, Sharp,Toshiba, Mitsubishi Electric, Fujitsu, NEC) combined have about US $ 500 Billion in revenues (sales), of similar economic size as the Netherlands, and have an important position in the global economy. While these companies were dominating global markets in the 1980-1990s, during the last 15 years they have not grown, and their combined profits over the last 15 years has been approximately zero. While these companies still file very large numbers of patents, possess important technology, for a combination of factors, they have not succeeded to achieve their potential. Recently, the financial position of SONY, Sharp and Panasonic have deteriorated substantially, and Sharp management has announced that the survival of the company is in danger. Overall these companies present extraordinary opportunities for improvement of performance. The second part of this report focuses on Japan’s top 7 electronic component makers (Murata, Kyocera,TDK,Alps Electronics, Nidec, Nitto Denko, Rohm).The financial position (growth and profits) of these group of companies is better positioned, they represent about 30%-40% of the global component market, which grows at 10% / year.The global electronics components market is estimated at around US$ 140-170 billion in 2012 and growing at an annual rate of around 10% to US$ 220 billion in 2017. However their margins are overall declining, indicating that change of business model is necessary. Japan’s electrical companies embrace “mono zukuri” (= making things, the art of making things) as a virtue.They emphasize manufacturing perfection as a competitive advantage.
  • 62. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 GLOSSARY 202
  • 63. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 GLOSSARY: JAPANESE FINANCIALYEARS 203 Japanese financial year FY2013 FY2012 FY2011 FY2010 FY2009 FY2008 Heisei (current Emperor’s period) Period 25 April 1, 2013 - March 31, 2013 24 April 1, 2013 - March 31, 2013 23 April 1, 2013 - March 31, 2013 22 April 1, 2013 - March 31, 2013 21 April 1, 2013 - March 31, 2013 20 April 1, 2013 - March 31, 2013
  • 64. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 EUROTECHNOLOGY JAPAN KK 204
  • 65. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 EUROTECHNOLOGY JAPAN KK FOUNDED: FEBRUARY 1997 INTOKYO 205 Services and products - focus areas are high-technology, telecommunications, software, middle-ware, environmental technology and medical equipment: - Market entry to Japan for European and US high-tech companies, turn-round, reshaping, planning and building of distribution networks - European business development and strategy for Japanese companies - M&A (European and US companies acquiring Japanese companies, Japanese companies acquiring or investing in Europe) - Turn-round preparations and management of foreign business in Japan - Market research and strategy - Due diligence of high-tech companies, environmental due-diligence - Advisory services for investment fund managers and investors in technology fields - we publish a series of market reports for about 10 years, which are purchased world-wide, distributed direct and via distribution partners: http://www.eurotechnology.com/store/
  • 66. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 EUROTECHNOLOGY JAPAN KK 206 - Leading high-technology business development boutique inTokyo, working globally - Founded in 1996/1997 - 14 years experience, relationships, cooperations and success record. - CEO works with Japan’s high-tech / telecom sector since 1984 - 27 years experience, resources, cooperations. - Wide network of cooperations in Governments, Embassies, trading companies, distributors, finance,VCs, traditional corporations, venture start-ups, industry associations - Experience: market-entry, restructuring, M&A, acquisitions, due-diligence Customers include: - More than 100 investment fund managers - Industrial customers: - NTT-Communications, SIEMENS, DeutscheTelekom, Cubic, Unaxis (now: Oerlikon), CITI Group, CLSA Asian Markets, Genscape, Google, IKEA, Isabellenhuette, Landis+Gyr, National Instruments, Swisscom,TechnoCom, - Government - NewYork Police Department, European Union,TEKES (Technology Research funding organization of the Government of Finland) Deep Japanese technology market knowledge - we publish a series of market reports for about 10 years, which are purchased world-wide.You can purchase our reports on Bloomberg: https:// www.bmart.com/search?&nuts%5B%5D=WIRE%3AEUT, and via eSellerate: http://store.eSellerate.net/ s.aspx?s=STR0576176470 and from http://www.eurotechnology.com/store/
  • 67. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 GERHARD FASOL PROFILE: HTTP://WWW.FASOL.COM/PROFILE/ 207 - Worked successfully with Japan’s high-tech sector since 1984 - 27 years. Came first to Japan in 1984 to help build NTT’s first international R&D cooperation on semiconductor lasers - Entrepreneur inTokyo since 1996, Eurotechnology Japan KK worked with many large corporate groups (e.g. SIEMENS, NTT, DeutscheTelekom,Asahi Glass...), more than 100 investment fund managers - Assoc. Professor of Electrical Engineering atTokyo University. Record of Fasol-Laboratory atTokyo University: http://www.fasol.com/tokyo_university/ - Elite “Sakigake” (Pioneer) R&D project on Spin-Electronics of Japanese Government Science and Technology Agency.This work was evaluated by US National Science Foundation and US Department ofTrade: http://www.wtec.org/loyola/erato/ch7_5.htm - Co-initiator of spin-electronics device research in Japan, one of the first to start work on spin- electronics in Japan in 1991 - Tenured Faculty member at Cavendish Laboratory/University of Cambridge. - Assoc. Professor of Electrical Engineering atTokyo University - PhD in Solid-State Physics (Cambridge University,Trinity College, UK) - Diplom-Physiker, Ruhr-University Bochum (Diplom-Thesis on Superconductivity) - Publication list (Books, patents and publications, several publications are specifially concerning electron-spin and spin-electronics): http://www.fasol.com/profile/publications.shtml - Languages: English, German (native), French, Japanese, and some Swedish
  • 68. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 GERHARD FASOL WITHTETSUZO MATSUMOTO, EXECVP OF SOFTBANK MOBILE CORPORATION 208
  • 69. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 209 see: http://accjjournal.com/the-galapagos-effect/
  • 70. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 “POST GALAPAGOS STUDY GROUP” 25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT” 210 see: http://accjjournal.com/the-galapagos-effect/
  • 71. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (22nd edition) August 4, 2013 CONTACT AND MORE INFORMATION 211 Contact •Gerhard Fasol PhD •Eurotechnology Japan KK,Tokyo, Japan •http://www.eurotechnology.com/ •Mobile +81-90-8594-6291 •fasol@eurotechnology.com •gfasol@gmail.com More information: •reports:http://www.eurotechnology.com/store/ •twitter: http://twitter.com/gfasol/ •website: http://www.eurotechnology.com/ •personal site: http://fasol.com