Estimated reading time: 5 minutes

EPTE Newsletter from Japan: Samsung Retreats

Several months ago, a topic in one of my newsletters examined the Japanese cellular phone industry. This market is supplied mostly from Japanese cellular phone manufacturers due in part from foreign cellular phone manufacturer's inability to satisfy the complicated requirements from Japanese customers. Conversely, Japanese manufacturers are not competitive against their foreign counterparts in overseas market.

A couple of recent media reports circulating announced that Korean manufacturers are planning to withdraw from the Japanese market. One global giant, Samsung Electronics, will abandon operations within the AV market, in particular, the flat panel TV segment.

Samsung founded a Japanese subsidiary in the early 1980s established to penetrate the Japanese durable goods market. Their game plan was to sell a broad range of products that included home appliances such as washing machines and refrigerators. Unfortunately, performance from this subsidiary was sub par, and the company decided to pull out of the appliance business in 2000. Since Samsung enjoyed overwhelming successes in the North American, European, and Chinese electronics market, they decided to focus attention on the Japanese AV market. Despite a powerful sales campaign, lower prices, and a recognizable global presence, success in the Japanese AV market was limited, and they gained very little market share.

Samsung did not provide specifics about its redeployment away from the Japanese market. However, industrial media reports suggest that Japanese customers cannot forget the old image of Korean products, "Cheap but low quality". This may have been true during the 1980s, but quality of Korean goods today is equivalent to Japanese goods. Still, Japanese customers purchase Japanese made products over Korean products even though their prices are 10% higher. These slim margins played into their decision to pull out of Japan and focus on established markets where Korean companies have a better brand image along with higher prices and margins.

Korean car manufacturers lack the same aura of respectability. Hyundai Motors and Kia Motors are successful in the North American and European Markets having secured significant market share. They are expanding into other countries including Africa and South America; however, the Japanese automobile market is a difficult one for the powerful Korean automobile manufacturers to gain a foothold. Korean car makers could not remove the stigma of low quality along with low prices from Japanese consumer's thought-process. A controlled sales network coupled with a high level of customer service from Japanese automobile manufacturers provide more hurdles for the Koreans. Currently, Korean automobile manufacturers have scaled back promotional campaigns in Japan. Could they be planning an exit strategy?

On the other hand, Taiwanese electronics manufacturers are flourishing within the Japanese market. Their approach is not to compete with brand named products in Japan, but rather become an integral part of them. Their bread and butter is obtained as subcontractors for Japanese manufacturers. Their niche has made them very successful. Nowadays, the majority of video game consoles and MP3 products are assembled by Taiwanese manufacturers, stamped with the Japanese brand logo, and sold within Japanese market. A majority of the inner framework for PCs, AV products and the other portable electronic products are exported to Japan from Taiwan. Sometimes, products are assembled in Chinese plants that are subsidiaries of Taiwanese manufacturers. Japanese consumers are not too concerned with the origin of manufacture, but pay attention to the product's brand name. They trust the brand name because the company stands behind their product and guarantees its quality. The subcontracting business provides a good margin for these Taiwanese manufacturers. This could be a smarter approach than that of the Korean manufacturers.

Dominique Numakura, DKN Research dnumakura@dknresearch.com

Headlines of the week

(Please contact haverhill@dknreseach.com for further information of the news.)

1. Chiba University (Japan) 11/3

Has developed a new blue color LED with a higher brightness compared traditional devices introducing a thin indium nitride layer.

2. Fuji Xerox (Major copy machine supplier in Japan) 11/3

Has developed a new lead-free shaft, a major part of the copy machines as the first step of the lead free system.

3. Mitsubishi Gas Chemical (Major PWB material supplier in Japan) 11/5

Has developed a new thin RF absorption sheet (film), "ElsoS" introducing non-metal inorganic filler to reduce the radio noise of mobile products.

4. Shinko Electric (Major packaging material supplier in Japan) 11/5

Expects remarkable recovery in the second half of 2007 because of booming orders of flip chip substrates.

5. Hitachi (Major electric & electronics company in Japan) 11/6

Plans to reduce 330,000 tons of carbon dioxide emission in the next five years.

6. LG Electronics (Major electronics company in Japan) 11/7

Has start the shipment of new smart phones "LG-KS20" with all touch screen for European market.

7. ST Microelectronics (Major semiconductor manufacture in Europe) 11/6

Has had a grand braking ceremony for the new assembling and test plant of semiconductors in Longgang, China.

8. Nikko Trading (Subsidiary of Nikko Material) 11/8

Has founded a new manufacturing plant in Malaysia for the final processing of copper products for electronics applications.

9. Tohoku Pioneer (Sister company of Pioneer) 11/7

Has co-developed a 5.6" touch panel with organic EL display for industrial applications.

10. Ube Industries (Major chemical company in Japan) 11/7

Has developed a new two layer tape circuit process with 30 micron pitch traces using semi-additive process.

11. Olympus (Major camera manufacturer in Japan) 11/8

Will invest 10 billion yens to build a new assembling plant of digital cameras in Vietnam. One of two plants in China will be closed instead.

12. Totoku (Specialty cable manufacturer in Japan) 11/9

Has developed a new high resolution LCD with 15 million pixels for medical imaging applications.

Interesting literatures about the packaging industry

Articles of DKN Research

1. New  "Screen Printing for High-Density Flexible Electronics", Robert Turunen, Masafumi Nakayama and Dominique Numakura, Printed Circuit FAB, October, 2007, http://pcdandm.com/cms/content/view/3846/95/

2. New  "Total Process Solution for the High-Density Multi-layer Flexible Printable Electronic Circuits", (Japanese only) Dominique Numakura, Denshi Zairyo, October, 2007

3.New  "The latest electronics package, Part XXXI, Cellular Phones", Dominique Numakura, Electronics Packaging Technology, October, 2007

4. New "Coombs' Printed Circuits Handbook, 6th Edition, Part 15-Flexible Circuits", Dominique Numakura, McGraw Hill, New York, September, 2007

5. New "DKN Research Develops Film Base Connector", Circuits Assembly, September, 2007.

6. "Flexible Circuit Materials", (Japanese only) Dominique Numakura, Denshi Zairyo, April, 2007

7. "Business Trends and Technology Trends of the HDI Flexible Circuits - Roadmap for the Ultra High-Density Advanced Flexible Circuits", Dominique Numakura, KPCA, October 31, 2006

From the Major Industry Magazines

1. "Rigid-Flex Technology: Mainstream Use but More Complex Designs", John Isaac, CircuiTree, September, 2007.

2. "Using AOI in the 01005 Assembling Process", Owen Sit and Joshua Petras, Circuits Assembly, September, 2007.

3. "Corner and Edge Bond Dispensing for BGAs", Al Lewis, SMT, September, 2007

4. "OPTOELECTRONIC SUBSTRATES - Will it happen?", Jack Fisher, Printed Circuit Design & Manufacturing, September, 2007.

5. "Single Wafer Surface Conditioning", Scott Drews, Advanced Packaging, August/September, 2007

7. "Under the Hood, Efficiency vs. Speed", presented by EE Times and Techonline, October 8, 2007

8. "Tape Substrate Manufacturers Have Been Facing Conversion Phases", (Japanese) The Semiconductor Industry News, September 26th, 2007