In this 1997 file photo, Emperor Akihito of Japan uses a magnifying glass as he takes a close look at a super high resolution Trinitron during a visit to Sony's Media World in Tokyo July 16, 1997.Eriko Sugita/Reuters
The television was bright, elegantly designed and -- here was the downside -- damnably tricky to make. But when Sony engineers learnt to finesse the new Trinitron's three-cathode tube into place, they created a worldwide hit.
It has been more than 40 years since the Trinitron vaulted Sony into the top ranks of consumer electronics companies. Today, as industry watchers know, the picture is dimmer: Samsung and LG of South Korea are the top sellers of tube-free flatscreens, and Sony's TV division is mired in its eighth year of losses.
Sony is not the only Japanese producer to struggle in the flatscreen era: Hitachi, Toshiba, Sharp are among those to have lost market share.
In the past decade, Japanese technology groups have lost almost a third of their overall market share to Taiwanese and South Korean rivals, according to a survey by CLSA, the independent brokerage and investment group. In televisions the decline has been sharper: Japanese companies make less than 10 per cent of the LCD panels that are the core of modern flatscreen sets, down from half a decade ago and virtually 100 per cent when the technology was first commercialized in the 1990s.
Yet there are signs - finally, many shareholders would say - that at least some Japanese producers are asking a once unthinkable question: should they be making televisions at all? Hitachi executives said this month they were considering outsourcing all their TV production to cheaper contract manufacturers elsewhere in Asia. Other companies are weighing similarly drastic measures, though they are reluctant to say so publicly.
Even Sharp - a relative success story and the leading seller of liquid crystal display (LCD) televisions in the Japanese market - is backing away from TV manufacturing, at least in Japan.
Hisakazu Torii, an analyst at DisplaySearch, says the choice facing Japanese groups has grown starker because of a global slowdown in flatscreen TV sales, particularly in richer markets where the latest and biggest Japanese sets still fetch premium prices. "People are buying smaller TVs for their second or third set, but there are no margins there," he says.
Even in Japan, where consumers have mostly stayed loyal to homegrown brands, price competition has been fierce amid a persistent glut of panels, a set's most important component. In the year to May the average price of a 32-inch LCD TV fell from $800 (U.S.) to $610, according to BCN, a market research group.
In the analogue era, when products such as the Trinitron ruled, Japanese companies prospered thanks to an unmatched ability to mass produce high-quality products at relatively low prices. The relentless rise in the value of the yen has eroded the price competitiveness of their factories in Japan, but it is the quality issue that has executives worried for the ultimate future of their TV businesses. Digital products can be churned out more easily and uniformly, making the sort of finicky hands-on work that made the Trinitron a success less valuable.
"You can't differentiate today," says Atul Goyal, an analyst at CLSA. "Now the industry is all about moving fast so nobody can catch up, and that's not in Japanese companies' DNA."
Kazuo Hirai, the Sony executive who is the leading candidate to succeed Sir Howard Stringer as chief executive, acknowledges that televisions have become a "commodity business". Sony now makes only about half of its TVs in-house, having closed or sold several factories as part of a restructuring. It promised further steps last month after it cut its full-year profit forecast by 25 per cent, owning largely to worse than expected TV sales.
Sony recently appointed a new head of its TV division, Masashi Imamura, whose job Mr. Hirai says will be to "fight commoditization" and differentiate its offerings. That will not be easy. Recent innovations such as 3D technology have not proved as popular as the company hoped, and rivals quickly matched its features. Sony's shares are at less than half the level they were back when the TV business was making money, and pressure to give up manufacturing sets, if not selling them, is mounting.
Sony's equity would be worth 70 per cent more if losses at its television division were eliminated, according to data compiled by Bloomberg.
Still, letting go of a business with a long history is difficult, not only because of the workers who depend on it.
"Manufacturing is an art, even in this day and age when a lot of stuff is automated," Mr. Hirai insists, saying Sony will continue to make at least some TVs in-house. "If you manufacture everything outside, then all the expertise that we've build in-house of the past 50-60 years doesn't really manifest itself in the product any more."
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