Japanese electronics sector teetering on brink of collapse

Japan electronics, which once ruled the world, is undergoing large-scale restructuring. Three years after massive layoffs in the wake of the 2008 global financial crisis, Japanese companies in the industry are again conducting drastic downsizing and selling off facilities to China and Taiwan due to high deficits.

Fortune magazine recently said in the article “The Agony of Japan Inc.” that the time when Japanese electronics was riding high might never come back.

○ Massive layoffs

Considering that Japanese companies have prioritized job security, the massive personnel restructuring is extraordinary and proves that the Japanese electronics industry is at a critical juncture. According to the Japanese daily Nihon Keizai Shimbun on Tuesday, Panasonic will lay off this year 3,000 to 4,000 employees, almost half its workforce, the largest layoff in the company`s history.

The struggling electronics giant cut 15,000 jobs in 2009 shortly after the onset of the global financial crisis. Another 35,000 workers were laid off after the sale of subsidiary Sanyo Electric to China.

In early April, Sony also announced a reduction of 10,000 employees, or 6 percent of its workforce in the second layoff of its kind, followed by its massive lay-off of 16,000 workers in 2008.

In last year, Panasonic suffered a record deficit of 772.1 billion yen (9.7 billion U.S. dollars) and Sony 456.6 billion yen (5.7 billion dollars).

Sharp, which has swayed the global TV market along with Panasonic and Sony, recently sold 9.9 percent of its shares to Taiwan`s Hon Hai Group after suffering a deficit of 376 billion yen (4.7 billion dollars) last year. Sharp`s LCD plant in Sakai is also in the hands of Hon Hai.

Renesas Electronics, a Japanese supplier of advanced semiconductors used in cars and high-tech IT products, will also slash 14,000 jobs by selling its Tsuruoka system chipmaking facility to a Taiwanese company.

With Renesas suffering from financial problems following the takeover of Elpida Memory, a leading Japanese manufacturer of DRAM integrated circuits, by Micron Technology of U.S., Japanese media said the Japanese sectors for IT parts, materials and finished goods are teetering on the brink of collapse.

○ Electronics giants on brink of collapse

Complex factors are blamed for the woes of Japanese electronics giants, according to experts. Such companies have grown less competitive than Korean counterparts and lost their lead in cutting-edge IT technologies to the U.S. In addition, the strong yen, last year`s massive earthquake and the eurozone financial crisis have dealt a final blow to the Japanese companies.

Fortune blamed the crisis of the Japanese electronics industry on arrogance and failure to follow the changes of the times. The magazine said the companies believed they knew better than consumers what was best, adding obscure intimacy with government bureaucrats quickened their fall.

The magazine said the rise of the Internet was the Japanese electronics industry`s technological downfall. Japanese conglomerates could not understand the Web, merely following cyberspace and never showing that they could lead it into new territory.

Japanese electronics companies had led the market through the early 1990s thanks to high quality and low prices. They made the mistake, however, of cutting back spending on their lifeblood of R&D after the Japanese stock bubble burst.

Fortune said that Japan`s worst enemy in the downfall of its electronics industry was itself, not industrial policies or challengers from rival countries.

changkim@donga.com