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Industry Report

Industry reports, briefs issued by Samsung Economic Research Institute

Structural Reform of Japan's Electronics Giants

Structural Reform of Japan's Electronics Giants

LIM Tae-Yun

Mar. 7, 2005

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Japan's giant electronics companies have reversed their fortune by improving profitability since 2002. In 2004, expected sales and ordinary profits of the nine biggest electronics makers in Japan are estimated to have reached 48.8 trillion Yen and 1.2 trillion Yen, respectively. This performance is close to that of 2000, the year Japan's information technology (IT) industry peaked. Their cash reserves also improved; Matsushita and Canon ranked third and fourth respectively in cash holdings.

This stellar performance resulted from a successful restructuring effort achieved by Japan's major electronics makers over the last decade. They have practically reinvented themselves since the bursting of the so-called IT Bubble of 2001. Since then, Japan's major electronics makers have relentlessly restructured on a scale that has never been seen before. From the 1980s through 1990s, they had tried every conceivable method to remake themselves, from cutting costs to innovating in a variety of ways to reorganizing their business, laying off workers, and achieving economies of scale. All this indicated how seriously they were determined to overcome the industry's crisis. Now that their makeover is more or less over, they have restored their confidence. This shows in their improving corporate balance sheets.

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