Japan Echo Web

Striving to Be Number One in Batteries

ITOH MOTOSHIGE How does the current global business environment look to you?

HOMMA MITSURU The American economy has been extremely active of late. And even though unemployment remains high, pricey consumer products in cars and electronics have begun to move, in particular in May and June. If we don’t see a recurrence of the financial problems, I think the recovery will move forward steadily.

On the other hand, Europe is still not showing much sign of recovery following the Greek financial crisis. But solar power generation is doing well; this is probably due to the “feed-in tariffs” whereby privately generated power is purchased at a set price.

ITOH I heard that FITs had been a failure in Spain.

HOMMA Yes, it’s true that the system did collapse in Spain at one stage. Following this failure, countries such as Germany are moving ahead very cautiously. Having said that, Spain is now beginning to recover gradually. Actually, I think we can say that the demand for renewable energy and sustainable energy will be steady everywhere from now on. Meanwhile, though I’m not sure if the unsettled weather is the result of the Icelandic volcano eruption, air-conditioning equipment is suffering. Whichever way you look at it, the European business environment remains tough.

ITOH How is Asia doing?

HOMMA It did very well last year, with double-digit growth at our company, Sanyo Electric. Things have slowed down a little this year, but performance remains strong, and the April–June quarter showed signs of a recovery. I think there is still much potential to achieve market growth by providing the kind of product that is suited to the lifestyles of people in Asia. We’re now manufacturing both refrigerators and televisions locally rather than in Japan. The idea is to produce locally what is consumed locally, use local people for product planning, and even procure all the materials locally. This has been a major success since last year and is another reason for our strong performance in Asia.

ITOH What kind of consumer electronics products are hits in Asia?

HOMMA In Southeast Asia it’s televisions and refrigerators. In countries there, the majority of TVs are still CRT models, and the penetration rate for flat-panel displays, such as LCDs, remains very low. Even for refrigerators, the penetration rate in places like Indonesia is still only 30 to 40 percent. People are keen to buy good products, but those made in Japan are too expensive and beyond their budget. That’s where changing marketing techniques by moving to local production makes it possible to grab the market for people who are trading up.

ITOH I hear that there are concerns that Japanese companies cannot keep up with their rivals in China and other Asian countries when it comes to growth speed. For example, Honda saw a 22 percent increase in Chinese sales last year, but the market itself grew by almost 40 percent, so that it lost market share. The same goes for Toyota. And in terms of actual units sold, the figures for Korea’s Hyundai are higher than for Toyota, Nissan, or Honda. What do you think about all this?

HOMMA In China’s case for example, the speed of decision making in terms of investment is incredibly fast. In addition, the government lends its support to fund raising and takes initiatives. It’s natural for their growth to be faster than that of Japanese companies. Japan’s integrated electronics manufacturers in particular are involved in a multitude of businesses. The more businesses you are in, the more important it is to make well-balanced investment decisions, which in turn results in a slower decision-making process.

In the case of Korean manufacturers, the industry saw a restructuring following the financial crisis of 1997/98. The end result was Samsung and LG for consumer electronics and Hyundai for cars. It seems that, consequently, they were able to engage in very dynamic investment decisions and fund raising. In Taiwan’s case also, specialized manufacturers are in the majority, so they have the power to raise funds dynamically and globally. I think that Japanese manufacturers have been overtaken on all fronts as a result of this difference in corporate culture.