Japan’s Reentry to PC Field Seen as Lackluster
More than a decade after all but abandoning the U.S. personal computer market, Japan’s electronic giants decided last year the market was growing too big to avoid, and they launched a renewed attack.
One year later, in spite of hundreds of millions of dollars in marketing and a long lineup of new products, they’ve made nary a dent.
And no one seems too surprised, either.
“[The Japanese] have been a dismal failure because Americans don’t think of PCs as televisions but as networking devices,” says Michael Borrus, a UC Berkeley professor who specializes in the transpacific electronics trade.
Because the latest PC innovations, including using PCs to tap into the Internet, occur in the U.S. market, says Borrus, “the Japanese companies are never there at the right time with the right mix.”
Leading the anemic assault was Sony, which last year introduced with great fanfare a new PC that boasted great video and sound. The company’s Japanese executives smugly predicted their consumer-friendly products and great brand recognition would enable them to take a 20% share of the U.S. market.
But the company’s share is so small that it doesn’t even show up in market research reports.
Toshiba, long a leader in laptops, launched a new desktop effort last year and predicted its share of the overall U.S. PC market would jump from ninth place in 1996 to fifth place by 1998. So far, though, it’s slipped to 10th place instead.
Hitachi and Fujitsu have done a little better, but not much.
Unlike Japanese auto companies, which made inroads into the U.S. market at a time when American auto companies had grown sluggish and sloppy, Japanese PC companies face well-entrenched and fiercely competitive rivals.
“To grow, you have to win share from somebody else,” says Bruce Stevens, a senior analyst at Framingham, Mass.-based IDC. And with scrappy companies like Dell, Hewlett-Packard and Compaq each leveraging their brand names to expand market share, says Stevens, “they [the Japanese] haven’t exactly taken the market by storm.”
The failure of Japanese firms to put together computer networks that can effectively bring them timely information on inventory, consumer demand and other key data has also handicapped them. Inventory problems, for example, contributed to Toshiba’s problems.
Executives at Japanese PC makers insist it’s too early to judge the results of the latest push.
“Our real goal has been to develop an infrastructure to support our PC sales,” says Tim Errington, senior vice president of sales and marketing at Sony’s U.S. subsidiary.
Recognizing that the PC won’t soon emerge as the control center for consumer electronics products like TVs and stereos--a “convergence” Sony one cited as a key reason for entering the PC business--the company has shifted its focus to digital imaging.
Sony is now packaging its PC with software and an optional multipurpose printer-copier-scanner that Errington claims makes it easy for any consumer to scan, record, print and e-mail images taken on a digital camera or camcorder.
While its rivals are competing on price, says Errington, “we’re trying to deliver a total solution.” Even if the company doesn’t make money on PCs, says Errington, it will make money on such pieces as cameras, speakers and printers that go along with the system.
But Sony’s consumer strategy could end up limiting Sony to narrow market niches.
“These are pretty esoteric applications,” says IDC analyst Stevens of the imaging market Sony is targeting.
Fujitsu, for its part, claims to be satisfied with its success in penetrating the corporate market. One year after jumping into the U.S. laptop market, the company has jumped to seventh place.
“We’re outgrowing the market and the competition,” says Greg Chambers, Fujitsu’s marketing vice president. At Comdex, Fujitsu will announce its first products for the rapidly growing server market.
Analysts say Fujitsu, as well as Hitachi, gained some advantages from having better access to Japanese production of liquid crystal display panels in a time of acute shortages. But now that such panels are in plentiful supply, analysts say, such access is no longer a strategic advantage.
Still, Japan’s electronic giants are learning some lessons that could help them do better in the future. They’ve established independent subsidiaries in the U.S. to take charge of the PC business, and they’re giving U.S. executives the responsibility and independence they need to lead the effort.
As a consequence, Japanese headquarters of the electronics giants are slowly becoming more attuned to the U.S. market. NEC, for example, has long tried to pilot its U.S. effort from Japan. Since acquiring a 20% share of Packard Bell, however, NEC has found itself forced to follow the lead of its new U.S. partners.
Last year, when Luis Machuca joined Packard Bell-NEC from Intel, he asked NEC engineers in Japan to design a 1 1/2-inch thick PC. When NEC insisted it was impossible, Machuca had a small Japanese start-up design the product.
“It was a humbling experience for [NEC],” says an NEC executive in the U.S.
Japanese companies are also moving more aggressively to offer strong customer support.
That could be an important weapon as Japanese companies broaden their attack to include the more profitable corporate market. Within the next six months, Fujitsu, Toshiba and NEC will all launch server products for use in corporate networks.
For Japan’s electronics industry the stakes are high. With growth in consumer electronics at a dead-end and growth in the Japanese PC market slowing sharply, Japanese companies are desperate to build a presence in America’s PCs market.
“We own 80% of the market for DVD [digital video disc] systems,” says Van Andrews, general manager of Toshiba America Information Systems. “But we can’t bring the technology to market first if we don’t have our own desktop computers.”
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Struggling for a Share
Despite a series of major initiatives launched last year, Japanese computer vendors have failed to make inroads in the U.S. personal computer market. A look at market share for vendors in the PC desktop and laptop markets in the third quarter of 1997 compared with the third quarter 1996:
PC desktop market share in the U.S.
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3rd quarter 3rd quarter 1997 1996 Compaq 19.1% 14.1% Dell 10.4 7.9 Packard Bell NEC 9.2 11.8 HP 8.0 5.7 Gateway 2000 7.5 6.9 IBM 6.6 8.2 Apple 4.9 7.6 Acer 2.7 4.0 Micron 2.3 2.0 Toshiba 1.0 1.2
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PC Laptop market share in the U.S.
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3rd quarter 3rd quarter 1997 1996 Toshiba 21.2 26.1 Compaq 15.7 9.3 IBM 12.4 11.5 Dell 6.1 4.1 Acer 5.0 8.2 Packard Bell NEC 4.4 5.0 Fujitsu 3.4 1.9 Hitachi 3.3 2.6 Micron 3.2 3.7 Gateway 2.8 2.0
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Source: International Data Corp.
