Japan shifting from consumer to specialized innovation

Country has evolved from mass commodity manufacturing to engineering specialized, highly-advanced technologies for enterprise market, say local industry players, who note Japan hasn't lost place as Asia's IT innovator.
Written by Jamie Yap, Contributor on

With Korea, Taiwan and China beefing up their tech efforts and gadgets to penetrate the region and world markets, Japan's innovative streak may be deemed to be losing steam. But industry watchers argue otherwise, noting that the country is still ahead of the game in other different areas of the technology sphere.

Andrew Milroy, ICT director at Frost & Sullivan, noted that whether Japan is still global technology innovator or lagging behind its former glory is simply a matter of perspective.

Looking at the country's previous standing in the mass, consumer manufacturing space, Milroy agreed that Japan is no longer at the top. However, he pointed out that Japan is still a leading innovator in the business-to-business (B2B) market.

In a phone interview with ZDNet Asia, the analyst explained that the world's second largest economy has evolved from being a manufacturer of mass market consumer goods such as cars in the early 1980s, to become a more specialized producer spearheading innovations in the B2B segment.

He stressed that Japan is not falling behind in the manufacturing market. Rather, he noted that it was no longer cost-effective for the country to focus on a market segment that is now populated with competitors able to compete with Japan in terms of price and quality.

Countries such as Korea and Taiwan have today taken over as mass producers and the "Chinese juggernaut is also fast catching up", said Milroy, who is based in Australia.

"If there was no Samsung, HTC or Huawei, then maybe a Japanese company would think it's worth the investment," said Milroy.

When contacted, a Samsung spokesperson said in an e-mail that the Korean company is continuing to push the envelope of technology and design to create "desirable leading-edge products" for early adopters and premium consumers. At the same time, Samsung wants to ensure the benefits of its innovations can be enjoyed by the masses, he said.

Ahead in advanced, complex technologies
According to Tomoaki Nakamura, research vice president of IDC Japan, the extent of Japan's status as innovator depends on the technology segment in question.

"In the commodity market, [encompassing] products like TVs, radio and consumer audio goods, Japan's position is weaker than before," Nakamura said in an e-mail interview. Just as Japan took over the United States' foothold in the 1970s and 1980s, China, Korea and Taiwan have now taken over Japan in the commodity products market, he added.

But when sophisticated systems or value-added components are involved, for example, semiconductor devices such as accelerometers and gyro sensors, as well as bullet train or nuclear plant design, manufacturing and control systems, Japan still has dominance and an edge over other its competitors.

Nakamura further noted that technologies needed to produce such innovations require more sophisticated engineering and long-term development efforts.

Frost & Sullivan's Milroy added that instead of solely concentrating on the mass commodity market, Japanese companies such as Sony, NEC and Toshiba, are choosing to focus on areas that are "not as crowded and where they can make money".

These big Japanese conglomerates are still doing well, he said, noting that they are just "making more of the stuff that you and I [as consumers] wouldn't buy". In the B2B space, Japan has significant competitive advantage, he said.

Kiyofumi Kusaka, CEO of NEC Asia Pacific, said the company has advanced from conventional computers and communications products to developing technologies and services in other areas. These include green IT technologies, lithium car batteries charging infrastructure, smart grid systems as well as communications technologies such as the NEC Hayabusa satellite space system, Kusaka said in an-email.

Leaders in some consumer markets
Benjamin Cavender, associate principle at China Market Research Group (CMR), added that while Japan's dominance as a technology innovator is eroding, there are still segments in consumer products such as photography equipment where Japan is well-positioned. He pointed to Canon, Nikon and Sony, as examples of players that dominate the DSLR (digital single-lens reflex) market.

In an e-mail interview, Cavender told ZDNet Asia that most of the new advances in photographic equipment also originate from Japanese companies such as the development of the micro four-thirds format used in cameras by Panasonic and Olympus.

In comparison, Korean companies such as Samsung currently still lack the "breadth of system options offered by the more entrenched players from Japan", he said.

Focus on usability, integration
To regain their foothold in Asia's consumer markets, Cavender suggested that Japanese technology companies focus on usability and the integration of hardware and software.

"It isn't enough to offer beautiful hardware or elegant industrial design. Companies such as LG, Samsung and Apple can offer that too," he said.

He noted that technology companies that found success did so by not only offering beautiful products but also seamless user experience. They also continue to add value to their device over time, he added.

Citing Apple as an example, Cavender attributed the company's success in Japan to the strength of its software ecosystem. The iPhone currently accounts for 72 percent of the Japanese smartphone market, according to MM Research Institute. The Apple iPad tablet also helped grow the company's share of the Japanese notebook computer market by more than three-fold in May 2010over the previous month, stated figures from research firm BCN.

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