Fumiaki Sato's latest book sounds like a bit of a snooze: It's titled A Scenario for the Realignment of Japan's Electronics Industry. But the Deutsche Bank (DB) analyst's 323-page tome has been jumping off shelves since its release last August. It's now in its fourth printing as electronics companies buy it for their employees, and Sony Corp. (SNE) has even asked for an English version. Sato's message is dire. "Japan's electronics makers aren't competitive enough to survive for long," he says.
There's more. The realignment Sato proposes would merge seven top electronics houses into just two giants. Matsushita (MC), Hitachi (HIT), and Mitsubishi would tie up as the world's largest maker of flat-panel plasma tvs, with a combined $190 billion in revenues. Sony, Toshiba (TOSBF), Sanyo (SANYY), and Sharp (SHCAY) would become a $175 billion titan, dominating the planet's production of LCD TVs. Other divisions, then, could be either merged or sold. Such a plan, Sato says, would help Japan's industry leaders maintain profitability once the white-hot market for svelte tvs starts cooling later this decade.
Industry executives are gobbling up Sato's tough criticism. Although none of the companies would comment on Sato's book, they have been his best customers, buying more than 20,000 copies. And he has become a celebrity on the speaking circuit. He gives as many as 10 speeches a month, earning up to $5,000 a pop to tell executives why their companies shouldn't exist. "Your profit margins are tiny and you're trying to do too many things," he berates Hitachi. "Will you remain a weakling that makes the same products as others?" he asks an industry group.
He's right about the overlap. Today nine Japanese companies have cell-phone brands, seven make laptops, and seven offer flat-panel tvs. That duplicated investment squanders cash that might be spent on expansion into high-growth overseas markets. Japan's electronics companies "would be better off if they worked together instead of competing," Sato says.
So far, Japan Inc. seems more interested in listening to Sato than in actually heeding his clarion call. Sato says most older executives are too conservative to make radical changes, while younger ones are too caught up in day-to-day operations to be able to push through the kind of reforms he believes are necessary. The companies "are unable to take action because of resistance from the inside," he says. As he continues his jawboning, though, he may be starting to make some headway. "There are so many Japanese companies in this industry," says Hiroshi Saji, an executive vice president at Sharp. "I would expect a period of consolidation."
By Kenji Hall