Japan Restored by Clyde Prestowitz

Author:Clyde Prestowitz
Language: eng
Format: epub
ISBN: 9781462915323
Publisher: Tuttle Publishing

THEN IT ALL CHANGED

In 1990, seven of the world’s top twelve electronics firms were Japanese. By 2012, only two remained in the top rankings. The number one spot had been taken by South Korea’s Samsung, followed by Apple and Google of the United States, and then by Taiwan’s Foxconn. Particularly striking was the fact that Apple, after much success in the 1980s, had nearly gone bankrupt in the early 1990s, while, until 1998, Google had been only an idea in the heads of two college students. Their sudden rise to the top ranks of global electronics firms illustrated both the speed at which innovation can unleash change and the unusual strength of the United States in fostering such changes and companies.

Japan’s loss of leadership in these fields was both broad and deep. Just as the Japanese semiconductor producers had displaced their US competitors in the past, South Korean and Taiwanese producers were now displacing the Japanese; the Chinese also began to get into the race. Surprisingly, the Dutch company ASML rose to become the leader in the production of key semiconductor equipment items. The Japanese auto industry also lost some of its momentum. While Toyota powered ahead, number two Nissan fell into deep trouble and had to be rescued in the late 1990s by Renault. The boom products, like the early transistor radios, color televisions, and the Sony Walkmans that Japanese industry had become accustomed to became fewer and Japan’s market share in many industries began to erode.

Japanese industry was slow to recognize the importance of the Internet. As a whole new generation of Internet equipment-oriented companies like Cisco, Juniper Networks, and Huawei emerged, the absence of Japanese firms among them was noteworthy. China, meanwhile, was rapidly advancing in many core computing and information technologies, and the IT network capabilities of its companies were world class—far superior to the fragmented, domestically focused Japanese network equipment providers.

To combat this loss of momentum, Japanese business and government leaders doubled the nation’s R&D spending in the late 1990s and early 2000s. Yet it seemed that the more they spent, the worse the situation became. For instance, while software inexorably gained critical importance, in the face of competitors like Microsoft, SAP, Oracle, and others, Japanese industry remained a marginal competitor. Because software is an enabling technology, weakness in its development had ramifications for many other industries. Take the e-reader industry as an example. In most respects, Japanese e-reader technology matched that of Amazon. But the embedded software of the Japanese producers had limited search capability. The result was that Amazon’s Kindle won most of the market. Nor was Japanese industry ready to introduce or compete with products such as the Apple iPad and iPhone, or to develop alternative operating systems like the Google Android system, which quickly came to run most of the world’s smartphones and which South Korea’s Samsung used as a springboard to leadership in the industry.

The lack of these kinds of completely new products was perhaps most disturbing to Japanese leaders.

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