Japan increasingly shut out of overseas television markets

Not long ago, Japanese brands such as Panasonic, Toshiba and Sony dominated the global television market with shiny models that were the envy of many Western homes. But in a rapid change to consumer demand, buyers around the world have turned their backs on Japanese-made sets in favour of cheaper, high-spec versions from South Korea and China.

As a result of mounting price pressure, in February, Panasonic announced it would pull out of overseas markets. Panasonic’s lower-end product, Sanyo, which is sold in Walmart stores across the US, will be bought by Japanese counterpart, Funai Electric, in return for royalties. Toshiba will also stop making and selling televisions in North America from March for the same reason of being unable to compete with specifications and price. Sony Corp, meanwhile, is spinning off its television division into a separately operated subsidiary.

Japanese brands have emphasised quality, but have little actual capability in making the LCD and LED panels

Strategic thinking
“The reason the Japanese players are suffering is down to strategy”, says Peter Richardson, Research Director at Counterpoint market research firm. “Japanese brands such as Sony and Panasonic have also emphasised quality, but given that they have little actual capability in making the LCD and LED panels, they are not able to bring anything differentiated to market. Add to this typically convoluted and costly business structures, and it’s hard for the Japanese vendors to make significant returns”.

Panasonic and Toshiba will refocus their efforts on the domestic market, as the demand for their high-margin, large-screen models remains, albeit not as ferocious as it once was. Brand loyalty for Japanese televisions is strong and enables a 90 percent share of the domestic market: LG, on the other hand, has only a two percent share, while Chinese brands are virtually non-existent in Japan. Although Japanese brands are not contending with a price war as elsewhere, revenue has shrunk in the domestic market also, with unit sales dropping from 24.8 million in 2010 to 5.6 million last year.

Filling the void are South Korean companies such as Samsung and LG. Competitive prices and an aggressive marketing campaign by LG have caused worldwide sales to increase to KRW174bn ($153m) in 2014, from KRW800m ($705,408) in the previous year. “The Korean brands, Samsung and LG prioritise quality and leading-edge technology thanks to their in-house development capability. This means they’re able to charge a premium and generate reasonable rates of return on investment”, says Richardson.

Chinese brands, on the other hand, have won a greater market share due to a focus on low prices and slim profit margins. “There are a number of Chinese domestic brands launching affordable smart TVs with high definition and quality, such as Xiaomi TV and Leshi TV. They are very competitive with the international rivals, especially these relatively expensive brands”, says Ivy Jiang, China-based Research Analyst for market research firm Mintel.

Changing consumer demand
The evolvement of technology and home entertainment has also contributed to a change in the global market, with consumer demand adapting to the new systems on offer, yet for lower prices than ever before. “Mintel consumer data shows the Chinese TV ownership is rapidly moving from standard definition TV to HDTV and internet-enabled TV, presenting 55 percent and 36 percent of surveyed consumers having HDTVs and internet-enabled TVs [respectively], compared to the 33 percent ownership of standard definition TV in 2014”, says Jiang.

The feat of surpassing global leaders in television sales is truly impressive given the pressure facing South Korean exports, which are currently competing with a strong won against a weak yen. As a surprising twist to the challenges facing the South Korean economy (one of the world’s most export-reliant), in the battle for the global share of televisions, South Korea has won. Its Japanese counterparts are receding wholly to the domestic market; something no one could have predicted a decade ago when they dominated worldwide sales. With such a withdrawal, it is unlikely Japanese televisions will ever make a comeback. The lesson for electronics companies to learn from this dramatic transformation is that, with cutting-edge technology, competitive prices and dynamic promotion, any market can be theirs for the taking.