Japan's Silver Lining - consumer electronics

Industry Standard, The, Jan 15, 2001 by Michele M. Yamada

In the post-PC era, consumer electronics lead the way.

Remember the '80s? Donald Trump was wallpapering his eponymous tower with money, Madonna was dominating the MTV generation, Michael Milken was peddling junk bonds -- and the Japanese were buying up half of Manhattan.

The '90s, however, were not so kind to Japanese businesses. Companies that hit it big in the early '80s -- from Honda and Toyota to Sony and Nintendo -- got left behind as U.S. firms drove the Internet Economy. (The Donald, Madonna and Milken have had their ups and downs, too.) But as personal-computer and dot-com companies have begun losing their grip in recent months, American dominance may also be slipping. Coming up: a shift in U.S. demand for consumer electronics -- to cell phones, game consoles, handheld computers and all manner of wireless gadgets -- that could give a boost to Japanese companies like Sony, Panasonic, Toshiba and NTT DoCoMo that have struggled along with the ailing Japanese economy.

For a preview of the coming gadget glut, just look to Japan. Consumers there have been busy taking calls on cellular phones while listening to downloaded pop tunes for a while now. Analysts predict that demand for tech toys such as portable and digital music players, Net-enabled mobile phones, DVD players and especially videogame consoles will spread to the United States in 2001. Despite a relatively disappointing Christmas season, the Consumer Electronics Association forecasts a 10 percent jump in sales this year -- with DVD sales rising 52 percent, MP3 player sales increasing 54 percent and digital-camera purchases going up by 26 percent.

Already, Sony's PlayStation2 has been a huge hit. After shipping more than 3.5 million units in Japan since March (a sales pace three times faster than that of its predecessor), Sony frustrated hordes of U.S. gainers when it failed to deliver a planned 1 million units in October. But by the end of the year, Sony says, 1.3 million units had reached eager U.S. players.

Back in Japan, half of the nation's 127 million people use wireless devices -- phones, pagers, PDAs. I-mode, DoCoMo's homegrown wireless Internet service, has cashed in on this fact to persuade 15 million Japanese consumers to access the Web directly through their mobile gadgets. Now DoCoMo has teamed up with U.S. partner AT&T Wireless to launch an I-mode-like wireless Internet package in the United States (where only 35 percent of consumers use wireless services). The service will begin rolling out midyear.

Even a rising tide of demand for electronics may not be enough to prop up a sagging Japanese economy that seems to be slinking back into recession. While the new toys are generating a lot of buzz, don't expect offers on Manhattan real estate anytime soon.