History of Electronics in Japan

Introduction

Japan is one of the oldest and largest consumer electronics manufactures in the world. It has dominated the market globally since its launch of the transistor radio. Home to Sony, a leading electronics company, Japan has utilized its talent, foresight into future consumer wants and needs, and trading strategies to its advantage. Many historic international trade theories use Japan as an example of both initial success and recent decline for this industry in particular. The history of electronics in Japan, and such theories, including Porters Diamond are discussed in more detail.

History of Electronics in Japan

Japan is not only known as the leader of manufacturing in consumer electronics, it also claims the groundwork for many popular American inventions. The Japanese's first success over the United States was in the 1950's when it chose to invest in transistors and the U.S. in vacuum tubes. This decision created opportunities for companies such as Sony to invest in radios and soon other Japanese companies followed suit. Canon and Nikon cameras were also modeled off foreign competition, the German Leicas (Hays, 2011).

Continuing with its success Japan increased the numbers of appliances manufactured and sold to 68.1 million units by 1997. "At one point Japan was producing 52 million calculators a year" (Hays, 2011). Along with radios, televisions, cars and appliances the Japanese also developed "lasers, diodes, CD players, screen technology, video recorders, and music synthesizers based in many cases on physics and chemistry discoveries made at U.S. laboratories like Bell Labs and RCA" (Hays, 2011).

However, in the 1970s Japan's luck began to turn. During this time, Sony's Beta system and Panasonic's VHS system battled to be the method of choice for the VCR. Although Sony decided to invested greatly in its Beta system and launched it in 1975, it eventually lost to the VHS. Japan did have a boost of sales in its electronics industry in the 1980s', potentially claiming the height of its success. The 1990's told a difference story, especially for television sales. In 1994, Japan shipped only 3.5 million color televisions, compared to 13.4 million in 1985 (Hays, 2011).

During the turn of the century, the demand for electronic gadgets increased in Japan and the yen's value began to decline. This combination resulted in a boom for Japanese companies. "They became leaders in digital cameras, cell phones, car navigation systems, DVD machines and flat-panel liquid crystal and plasma television" (Hays, 2011). However, no one could foresee what was to come for Japan's electronics industry after 2008. The appreciation of yen resulted in less demand for Japanese products and the launch of Apple's iPod, iPhone and iPad changed Japan's leadership position in this industry for how we know it today (Hay's, 2011).

International Trade Theory and Japans Electronics Industry

As evident by the history of electronics in Japan, the country began in the industry at an absolute advantage, one of the more efficient producers worldwide. Four theories in particular outline the implications, policy instruments, and influence on foreign direct investment Japan had and continues to have on international trade.

New trade theory, a determinant of absolute advantage, "is the observed pattern of trade in the world economy and may be due in part to the ability of firms in a given market to capture first-movers advantage" (Hill, 2011). Japans leadership in the production of liquid crystal display screens is an example of strategic trade policy, one facet of new trade theory. "Although these screens were invented in the United States, the Japanese government, in corporation with major electronics companies, targeted this industry for research support in the late 1970's and early 1980s. The result was that Japanese firms, not U.S. firms, captured first-mover advantages in this market" (Hill, 2011).

According to the Heckscher-Ohlin theory, "one condition for trade between two countries is that the countries differ with respect to the availability of the factors of production" (Hill, 2011). The theory also contends, "the more different the countries are regarding the capital-to-labor ratio, the greater the economic gain from specialization and trade" (Why Trade?, 2011). In 1949, Japan formed the Japanese Ministry of International Trade and Industry (MITI), a government agency continuously on the lookout for export opportunities. Sogo Shosha, or Japans great trading houses, spread throughout the world, proactively searching export opportunities for its domestic companies (Hill, 2011). "The close relationship between MITI and Japanese industry has led to foreign trade policy that often complements the ministry's efforts to strengthen domestic manufacturing interests. MITI facilitated the early development of nearly all major industries by providing protection from import competition, technological intelligence, help in licensing foreign technology, access to foreign exchange, and assistance in mergers" (Ministry of International Trade and Industry, 2011).

Another potential reason behind Japans exporting successes is its administrative trade polices, or the bureaucratic rules it designs to make it difficult for imports to enter its country. "Some analysts argue that the Japanese are the masters of this trade barrier. In recent decades Japans formal tariff and nontariff barriers have been among the lowest in the world" (Hill, 2011).

The article, Japanese Electronics Industry: History, Semiconductors, Decline and Competition from Apple, China and South Korea, as seen on FactsandDetails.com (Hays, 2011), discuss Japan's past exporting efforts and its challenges to date.

"Meanwhile, the emphasis on consensus has made managing foreigners difficult. Japan's multinationals traditionally concentrated on exporting rather than investing abroad, partly because they felt that their manufacturing system was so Japanese that it could not survive on foreign soil. Now, thanks to the high yen, fears of protectionism abroad and globalization, they have no choice. The Nomura Research Institute predicts that, by 1998, almost 40 percent of the production of Japan's five biggest electronics groups will be offshore" (para.10).

As time went on competition grew stronger, especially from Samsung in Korea and Apple in the United States. "In the US market alone, South Korean mobile phones are currently taking up almost 50 percent of the market share. Its LCD-TV global market share also