Home Electronics Industry Pursues New Growth with Optimal Production Sites and Higher Value Added

Yuji Yoshihisa

Summary

In the early 1990s， the audio-visual home electronics industry suffered from a slump. A long drought in leading products had led to a maturing market， production was being moved overseas production due to the strong yen， and product prices were in decline. But today， in addition to an expansion in production centered overseas， there are signs of new growth such as the emergence of the digital home electronics market. The growth strategy for the second half of the 1990s will center around (1) optimization of manufacturing sites to minimize costs， and (2) shift to digital electronics to increase the value added to products.
In the second half of the 1990s， the most cost-competitive manufacturing bases are likely to be in the leading ASEAN nations (Malaysia， Thailand， and Singapore)， where the strong presence of Japanese electronic component suppliers provides a significant advantage in parts procurement. But to alleviate the impact of yen-denominated costs in the ASEAN region， companies need to shift out of yen-denominated costs in production and management by bolstering local product planning and design capabilities， developing local suppliers， and building a dynamic local management organization.
Digital home electronics products with higher value added are expected to be new leading products as a major shift occurs in technology. Technical merits include better image and sound quality and higher data capacity. Presently， digitization is centered around enhancements of existing products， and the market is dependent on replacement demand. Products expected to proliferate include the MD (mini-disk)， DVC (digital video camera)， and DVD (digital video disk). These products will revive the slump in conventional products， and contribute to moderate market growth in the late 1990s.
In the future， new product categories incorporating digital technology will emerge that merge the AV field with information and communications equipment. To maintain competitiveness， Japan's AV home electronics industry will need to incorporate the two strategies mentioned above. In addition to bolstering competitiveness as hardware manufacturers， corporate alliances will be needed to accumulate expertise in the increasingly important area of software. At that point， performance improvements through the synergy between hardware and software will cause a transformation into the multimedia industry.