A Tsunami Of Gizmos

Its closing time at Bic Camera, one of Tokyo's discount-electronics stores, and shoppers are still prowling the aisles. They mean business. Despite Japan's severe economic slump, these enthusiasts are snapping up Sharp camcorders and Sony digital recorders. "We're selling these products as fast as we can stack them," says Assistant Manager Yu Horikoshi.

This buying frenzy may seem out of place. The past year, after all, has produced the worst slump ever for Japan's electronics makers. With sales off at home and the high yen hurting exports, companies have cut workers and forced out executives. But throughout the turmoil, the Japanese have kept their eye on the long term. Since the late 1980s, Sony Corp., Matsushita Electrical Industrial Co., and others have invested $500 billion in research and development, leading to a quantum leap in miniaturization and liquid-crystal-

display technologies. And in a major reversal, the Japanese have relied on the brain trusts of such American companies as Texas Instruments Inc., American Telephone & Telegraph Co., and startups to provide the chips and software essential to the products.

The result is a ripple of excitement among Japanese consumers who years ago stuffed their homes with VCRs and Nintendo machines. The biggest hit has been Sharp Corp.'s LCD ViewCam. Instead of the usual tiny viewfinder, the ViewCam uses a 4-inch liquid-crystal display that lets you watch the movie in color on an ample-size screen as it's being shot. "The breakthrough came in a flash when we understood that we could replace the viewfinder with an LCD," says Yoshio Okano, the Sharp manager who headed ViewCam development.

Despite the high prices, ranging upwards of $1,300, Sharp has sold 200,000 units since last October and commands 20% of the domestic market. That makes ViewCam "a decisive hit," says Shigetoshi Kono, vice-secretary general of Nippon Electric Big-Stores Assn., a retailers' group in Tokyo. Sharp has more than tripled production. Exports could be nearly half a million units this year as the ViewCam hits U.S. stores.

There's more than videomania going on here. Sharp managers insist that the ability to build these LCD screens is the key to successful product innovation in the 1990s. That's one reason NEC, Toshiba, Hitachi, and others are investing billions of dollars to catch Sharp in LCDs. Predicts David Benda, senior analyst with Barclays de Zoete Wedd in Tokyo: "Others are certain to emulate what Sharp has done." Sure enough, on Aug. 31, Sony Corp. unveiled a ViewCam look-alike called Handycam Snap. The price: $1,200, just below Sharp's ViewCam.

NIFTY NOTEBOOK. LCD technology is paying off elsewhere. After seeing its share of the laptop computer market decline for years in the U.S., NEC Corp. made a comeback in April with featherweight notebook computers, leveraging its strength in color LCDs. The UltraLite Versa notebook, which costs about $4,800, has a "modular" design that lets users change the screen, disk drive, and memory by snapping them on and off the main body. In the notebook market, LCD capability and a knack for making things smaller have helped Toshiba, Epson, and Matsushita gain share in the U.S. In the first quarter of fiscal 1993, Japanese companies shipped about $1 billion worth of notebooks and related peripherals to the U.S.

Matsushita's next flat-display product could be another triumph of miniaturization. In October, after 20 years of R&D, Matsushita takes the wraps off its 14-inch Flatvision TV, which has a screen less than 4 inches thick.

The image is brighter than an LCD and can be viewed from any angle. Matsushita says it can eventually be made in sizes as large as 20 inches.

The company hopes to make another splash next month. Its $699 REAL video-game player uses fast-spinning compact disks and special graphics chips to produce games with images that are far superior to those offered by Nintendo Co. and Sega Enterprises Inc. A San Mateo (Calif.) company, 3 DO Co., designed the player, and Matsushita is building it. William M. (Trip) Hawkins III, president and CEO of 3 DO, figures the Japanese giant has committed up to $100 million for the launch. If Matsushita avoids a head-on battle with Nintendo and Sega, it stands a good chance of succeeding, says electronics analyst Jeff Camp at Jardine Fleming Securities Ltd. in Tokyo.

Rivalries are also heating up in digital audio products. Sony's MiniDisc systems hold 74 minutes of sound on a disk smaller than a music CD, and unlike those CD players, MD systems can record. Matsushita and Philips Electronics are countering with the Digital Compact Cassette system, which can run old, analog cassettes as well as superior-sounding newer, digital ones. But analysts like Sony, since MD's laser-based technology lets the listener skip quickly to the desired cut on the disk. "Sales are growing at twice the rate of CD sales during its introduction period," says Sony President Norio Ohga.

In the heat of these battles, the Japanese are not only showing the strength of their own technology. They are also learning how partnerships with American companies give them a strategic advantage. The Matsushita-3 DO linkup is just one example. Last year, Sanyo Electric Co. tapped AT&T Microelectronics to design a processor that lets the handset of its cordless answering telephone double as a speakerphone. The $660 product is one of the best-selling units in Japan, helping make Sanyo the cordless answering-telephone leader. Sony, meanwhile, has been placing Texas Instruments' chips into everything from video cameras to its latest MiniDisc products. "There's no other company that can offer the same range of semiconductor products," says Sony Deputy President Nobuo Kanoi.

GRAY AREA. For many new multimedia products, it's hard to pinpoint where U.S. input ends and where Japanese expertise takes over. Take Nintendo's new partnership with computer-graphics leader Silicon Graphics Inc. (SGI), which provides the gamemaker with chip- and system-

design knowhow. When it comes time to purchase the chips, Nintendo will likely turn to SGI's Japanese partners--either NEC or Toshiba--which today develop and build some of SGI's most advanced microprocessor designs under


Some of America's largest electronics companies are also learning how to pair up for product launches. Take Sharp's involvement with Apple Computer Inc.'s Newton "personal communicators." Sharp hatched its game plan 18 months ago when it signed with Apple to co-develop and manufacture

these powerful electronic notepads. Sharp makes all the Newton products for Apple and gets to sell its own version, the Expert Pad, with identical functions. Neither Apple nor Sharp will release U.S. sales figures. But demand is so high that Sharp says it can't keep pace. "We've sold out every bit of inventory we've brought in," says Gil DeLiso, a marketing director for Sharp. Both companies plan launches in Japan next year.

Will these offerings be enough to pull Japan's electronics companies out of the doldrums? Probably not--or at least not right away. But they show how Japan's innovation engine is still humming and how the Japanese are effectively tapping outsiders for help in launching products quickly. Eventually, that might reignite consumers' interest--and, the Japanese hope, restore lost strength to a crucial industry.

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