Growing competition from Asian rivals, sinking semiconductor prices and a global electronics slump that is worsening after the terrorist attacks are sending the top names in Japanese electronics crashing into embarrassingly deep losses.
Even the companies' executives acknowledge this nation's once mighty electronics sector has dived into a crisis more serious than ever before. All major electronics companies, except for Sony Corp, are forecasting staggering losses for the fiscal year ending in March.
PHOTO: AP
The Japanese are still concerned with the same industriousness, attention to detail and lower costs in mass production that had made quality synonymous with "Made in Japan" for years.
But these days, the concern is that those traits are now more descriptive of China, South Korea and the rest of Asia.
After decades of building success on "mono zukuri" -- a phrase that simply means "making things" -- this country's manufacturers are discovering they have failed to respond quickly enough to global competition to come up with the ideas, technologies and services that allow them to one-up their rivals.
And the worldwide slowdown has come just at the wrong time. Japanese companies have long relied on exports to drive profits.
No one is suggesting that these companies are about to collapse or get bought out -- at least, not yet.
Matsushita Electric Industrial Co managing director Yukio Shohtoku said he was seriously worried his company was becoming an easy target for a takeover.
"The threat is not a theory. It is a possibility, although not a probability," he said.
As companies such as Matsushita struggle to ride out tough times through cost-cutting, alliances are on the rise -- agreements that bring together rivals in limited areas but stop short of full-fledged partnerships.
"We can do it alone, but can we make it in time?" Shohtoku said. "We can buy time by alliances. Timing is very important."
In October, Matsushita set up a joint venture with Toshiba Corp to unify their LCD businesses.
Earlier this year, Matsushita, which makes the Panasonic brand, tied up with NEC Corp to share technologies in next-generation cell phones.
In May, it said it will work with Hitachi to develop digital home electronic products, including refrigerators and washing machines.
Other companies are following suit.
Sharp Corp and Sanyo Electric Co are working together in consumer electronics research. Sharp is also supplying microwave ovens to Sanyo in Europe, while Sanyo in return supplies refrigerators to Sharp in Southeast Asia.
Fujitsu is setting up a joint venture with Japanese camera-maker Minolta Co to develop color laser printers. Fujitsu also has an alliance with US networking giant Cisco Systems to offer systems solutions by combining Fujitsu's software and Cisco's network equipment.
Sony Corp has formed a joint venture in mobile phones with Swedish wireless equipment maker LM Ericsson.
Limited alliances are better than all-out ones that tend to be "clumsy and slow," said Sony spokesman Gerald Cavanagh.
"Speed and mobility are crucial," he said.
Masahiro Ono, analyst with UBS Warburg in Tokyo, foresees more alliances in the works.
"All the electronics companies are really trying to change," Ono said. "And we can't judge yet which ones will survive and which ones won't."
Smaller companies may have an easier time shifting gears to become niche players.
Sharp has a reputation in LCDs. Sanyo leads in digital cameras and has kept profit falls in check with semiconductors for less sophisticated, analog electric goods.
Giants like Sony and Matsushita will probably have to fight harder to prove that size hasn't turned them into dinosaurs.
In a switch from this country's tradition that upholds lifetime employment, the electronics makers have announced job cuts by the thousands.
But none are resorting to mass layoffs.
The early retirement and other programs are proving costly and taking their toll on already catastrophic earnings reports.
Matsushita announced a large-scale early retirement program for the first time in its 80-year history and is planning to cut 8,000 jobs, or 3 percent of its global work force, by March. That effort is costing Matsushita ?130 billion (US$1.1 billion).
For the fiscal year ending in March next year, Matsushita is expecting its biggest loss since its stock market listing in 1971 of ?265 billion as sales dived in a range of products from mobile phones to computer parts.
Hitachi expects to lose ?230 billion, Fujitsu is predicting a loss of ?310 billion, Toshiba ?200 billion and NEC Corp ?150 billion in losses.
Only Sony Corp, which also has entertainment units, is hoping to eke out ?10 billion in profits for the fiscal year.
Fujitsu Senior Executive Vice President Takashi Takaya recently acknowledged the company may have to lower earnings projections again -- for the third time.
"The future is that uncertain," he said.
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