Electronics industry headed for slowdown?
(MoneyWatch) News out of the consumer electronics industry of late has centered on the success of a few players, such as Apple (AAPL), Google (GOOG), Microsoft (MSFT) and Samsung, amid healthy spending by U.S. consumers. But the good news does not extend to Japan, where some of the industry's former powerhouses are struggling.
Sony (SNE) and Pioneer both continue to post losses, while Sharp has even raised doubts about its future, just to cite three recent examples. Although this downturn has yet to be felt among U.S. tech companies, the tight interconnection among global markets suggests that a decline on Japanese soil could soon affect leading companies elsewhere around the world.
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In some respects, of course, the trouble in Japan is old news. It has been many years since the country's electronics giants ruled the market. Sony has been losing money for years, even as it tries to maintain its standing as a premium vendor of electronics. In another example of the Japanese electronics industry's fading luster, it was revealed last year that imaging company Olympus had used accounting maneuvers to hide losses for decades.
Even Japan's healthier companies in the sector are slowing down. Toshiba's net sales dropped year over year in its last reported quarter, although it remained profitable. And the chemicals division of Mitsubishi, which supplies electronics manufacturers, saw a 24 percent drop in net income.
For a host of reasons, many Japanese electronics companies have lost their innovative edge and become uncompetitive, with costs far outstripping their revenue growth. Unlike many American or European consumer electronics firms, which tend to primarily make devices for consumers and businesses, Japanese electronics companies have also typically manufactured components. That has resulted in higher costs at many of these companies.
Sharp, for example, is a major maker of large-screen television LCD panels. Sony is a big manufacturer of specialty semiconductor devices, as is Pioneer. Not only do these companies produce components that others rely on, but they purchase products and help drive up global volume, which allows companies to keep prices lower.
If any of these companies should collapse and disappear, it is likely to affect all its customers and vendors, including U.S. electronics companies. Last year's earthquake and tsunami in Japan severely disrupted the global electronics market. Even mighty Apple was shaken when it couldn't get necessary components as required.
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Erik ShermanErik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.
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