Over the weekend a New York Times story had some interesting insights into the continuing labour problems at Japan’s once proud electronics giants.
It alleged that workers who are unable to be sacked are often sent to oidashibeya or “forcing out rooms” where they are made to perform menial or repetitive tasks in a bid to make them resign out of shame and boredom.
It’s not particularly nice but it’s a situation that seems to have been forced upon multinationals such as Sony because of Japan’s relatively strict employment laws which make it hard to sack staff without good reason.
These firms simply can’t be as agile as their international rivals because they can’t downsize or strip out waste in specific areas. In the technology industry especially, skills can quickly become outdated.
As Gartner analyst Hiroyuki Shimizu told me, these laws should take the majority of the blame for the decline of Japan’s electronics industry on the global stage.
“In these 20 years, the goal for the company executives in almost all the Japanese electronics companies were to make much use of (or not to leave idle) their own excessive resources including workers and assets,” he said.
“In the global electronics market, companies focus on their differentiators. However, Japanese companies focused on the segments where they have plenty of human resources and large assets.”
This is a major failing of Japanese technology firms but not the only one.
Large scale job cuts are starting to appear, at firms including NEC, Sharp and Sony, although more are probably needed. However, this stripping out of dead wood needs to go hand in hand with enhancing traditional areas of technical weakness, said Shimizu.
It’s also true that there’s more to Japan’s well-charted decline on the technology front than just some stubborn employment laws.
“There are several reasons for each Japanese company for losing power such as commoditisation of electronics products, severe competition with Korean or Taiwanese companies or exchange rates,” he told me.
“But we consider that the deep-seated reason is the employment policy of Japanese companies.”
An interesting bit of research cropped up on one of the few English language sites covering Chinese news in this region, Taiwan’s WantChinaTimes, claiming the average lifespan of a Chinese electronics manufacturer is a shade over 13 years.
Now this sounded pretty low to me, not having anything to compare it to, but it struck as an interesting stat which serves to illuminate a lot of the pressures Chinese manufacturers are facing today, and where the country wants to be in a few decades time.
The research itself came from a Chinese manufacturer called Global Market Group, which interviewed over 1,000 firms in the economic zones of the Pearl River Delta and the Yangtze River Delta. It’s not a huge sample, given the sheer size of the industry in the PRC, but it’ll have to do.
The first thing to note is that 13.2 years is much longer than the average for survey respondents of 11.1 years – the report argues that this could be because electronics makers are forced to adapt quickly to changing tech to keep afloat.
More generally, though, 13.2 years doesn’t seem like a long time for a firm to be in business. But it does illustrate the rapid pace of change in the tech industry – where many fall by the way side in time because they simply can’t keep up with the latest trends.
It also shows, as Forrester analyst Dane Anderson told me, the intense pressure on Chinese manufacturers burdened with rising labour and energy costs and competition from other low cost suppliers in Asia.
US politicians and loathsome right wing media outlets often make out China to be the bad guy – taking American jobs by offering brand owners by far the lowest cost of production. However, increasingly it’s becoming a more complex picture than this.
“The perception in the West is often that the manufacturing industry in China is a bullet-proof juggernaut, but this view is inaccurate,” said Anderson. “It is a dynamic and highly competitive sector squeezed by thin margins and demanding customers.”
But as China looks to move up the stack, away from being a land of contract manufacturers mass producing at low prices in incredibly competitive market conditions, things might change, according to IDG’s senior research manager William Lee.
“The electronics industry is typically a high clockspeed industry, meaning the average product lifecycle time span is shorter than say automotive, aerospace, industrial equipment. So electronics manufacturing companies’ lifespan is typically shorter than other companies in other industry,” he told me.
“However when the manufacturing industries mature and many of these companies begin to evolve to brand owners, the average lifespan will increase.”
With China still some way behind Taiwan, South Korea and other countries, it will be a while before this happens, but it surely will, as this is the direction the Chinese government wants it to go in. It recently announced ambitious plans to create eight super-companies in the tech space each the size of Lenovo ($100bn in revenues per year), which would have globally recognised brands.
When that finally happens, and the sweat-shops move out to Vietnam, Indonesia and elsewhere, maybe the US will have to invent another bogeyman.
Has anyone been to Akihabara lately? I know I’m probably way behind the times here, but I still had the impression it was the land of all things shiny and technology-related – where impossibly gadgetry was salivated over by Japanese otaku and envied by foreign visitors.
As my latest ramblings on The Reg explain, I was rather disappointed to see, on exit from the station, pristine pedestrian walkways, giant IT mega-stores and shopping centres. Redevelopment over the past few years has apparently made the place a lot more family and tourist friendly but definitely not much fun for those interested in tech.
Most of the small, cramped, independently owned consumer electronics stores have closed now, but don’t blame the local mayor for wanting to redevelop the place. From my conversations with Japan tech experts and analysts it was going to happen anyway.
The area was big in the 70s, when according to some estimates, 10 per cent of all household appliances sold in Japan were bought in Akihabara. Then the PC and laptop boom in the 90s and beyond took over, drawing in a more geeky crowd keen to build their own customised machines.
But now it’s all cosplay, manga, Maid Cafes and Hobby shops. It seems the tech industry, and Japanese consumers, have moved on. They’d rather get their gadgets online now and maybe try before they buy in a megastore like Yodabashi Camera, according to an IDC analyst I spoke to.
On the other hand, it’s fascinating to see the area reinvent itself as a geek manga/anime/cosplay paradise. Japan, if nothing else, has a remarkable resilience.
The decline of Akihabara as a tech hub is therefore unlikely to portend the collapse of the country’s once unstoppable tech industry.