By Choi Sung-jin
Since the turn of this decade, cash-rich Chinese companies have taken over, one by one, the well-known Japanese makers of home appliances. Starting with Sanyo in 2011, such household names in consumer electronics as NEC, Sharp, Toshiba and Fujitsu have sold off their units making finished appliances, including white goods and PCs, to their newly surfacing Chinese rivals.
As seen by Chinese makers armed with powerful government support and a huge home market, these Japanese companies, reeling from protracted business setbacks and troubled financial health, were “good preys.” The restructuring of Japan’s electronics industry started 10 years ago and is yet to finish.
Some market watchers call the Chinese takeover of the Japanese electronics makers “China-Japan collabo(ration).” The “China money” is clearing up the marginalized areas of personal computers and liquid crystal displays, speeding up the restructuring of Japan’s electronics industry and serving as a stepping stone for the latter to jump into new areas.
For the South Korean giants, such as Samsung Electronics and LG Electronics, it is as if their butts are on the fire, the market observers said. “Their Chinese competitors are shaking up the home appliance and display markets by making the most of the Japanese makers’ patents, know-how and brand power, while the Japanese rivals are speeding up their advances into state-of-the-art parts and components, widening the gap with Korean companies,” an analyst said.
The Chinese takeover of Japanese electronics makers has been progressing over several years. The Haier Group, China’s largest home electronics maker, acquired Sanyo’s washing machine and home refrigerator units in 2011 and went on to buy out General Electric’s consumer electronics business. Toshiba also sold off its Indonesian plant, one of its manufacturing bases, to China’s Skyworks Technology last year, and handed over its white goods division to China’s Midea this year.
Japan’s PC makers, which dominated global markets not long ago, are being absorbed by Lenovo. The Chinese PC giant established a joint venture with NEC in 2011 and is negotiating to take over Fujitsu’s PC business. The Lenovo-NEC joint venture accounts for 26.3 percent of Japan’s PC market and the share would rise to about 43 percent if Lenovo manages to acquire the Fujitsu unit, also expanding its global share by 2-3 percentage points.
In keeping with the Beijing government’s policy to attain “technological independence” in displays, China’s Hisense has bought Sharp’s Mexican plant and the Japanese company’s TV brands, Aquos and Quatron.
The highlight in demonstrating the power of Chinese money came in February when Taiwanese electronics giant Foxconn, or Hon Hai Precision Industry Co., jumped into the takeover battle for Sharp, the long-time symbol of Japan’s display industry, and completed its acquisition process in August.
Industry watchers say the brisk mergers and acquisitions between Japanese and Chinese makers will exert enormous influence on global electronics markets. Some positive effects have already been shown, as in the case of the Haier-Sanyo and Lenovo-NEC mergers.
Sharp, which had been reeling from the failure of its 10th-generation LCD plant and protracted slumps in its TV, consumer electronics and smartphone businesses, is shaking off its label as a “ruined house” and being reborn by jumping into new areas. Sharp plans to expand production of TVs to 10 million by 2018 and resume making smartphone panels in the Asian region. Thanks to investment by Foxconn, it has also restarted research and development on organic light emitting diodes (OLED).
The Korean rivals of these “Chinese-Japanese collabo” are likely to be hardest hit, especially Samsung and LG. “For example, the subsidiaries of Foxconn, which have not been able to make high-definition LCD panels, have obtained the stepping stones to challenge Samsung and LG by acquiring the Japanese technologies,” a market analyst said. “Chinese companies may soon get out of the low to mid-price markets and expand their footholds in the premium electronics markets.”
A China expert also cautioned against the increasingly fierce challenge from Chinese makers.
“It has long been anticipated that the Chinese companies, armed with deep pockets and a vast home market, will emerge as central players in the global electronics and IT industries,” said Park Seung-chan, chief of the Management Institute of China. “These trends will likely continue because Chinese companies can make the most of Japan’s know-how and brand power in Asia while the Japanese firms have access to massive Chinese capital to create the basis for developing new technologies.”