Panasonic Corp's answer to the brutal onslaught on its TV sales may be
in a product the Japanese firm launched 17 years ago and which is a
must-have for U.S. police cars.
Two thirds of the 420,000 patrol cars
in the United States are equipped with the company's rugged Toughbook
computers, and Panasonic chief Kazuhiro Tsuga sees the niche product as a
model for how the sprawling conglomerate can make money beyond a gadget
mass market increasingly dominated by Samsung Electronics and Apple
"What we need are businesses that earn, and they don't
necessarily have to have big sales," Tsuga told reporters after his
appointment as company president was approved in June.
sees avionics Panasonic is the world's leading maker of in-flight
entertainment systems - automated production machinery, and lighting as
profit earners as income from TVs and other consumer electronics
Panasonic, Sony Corp and Sharp Corp have been hit hard
by South Korean-made TVs, Blu-ray players and mobiles and Apple tablets
that threaten to wipe out Japan as a global consumer electronics hub.
The Toughbook, sold only to businesses and governments, was conceived as
a response to the type of profit sapping competition that is now
"At the time, we were losing in personal computers to
Compaq and IBM," said Hide Harada, who heads the Toughbook unit from
the group's headquarters in Osaka, western Japan. IBM later sold its laptop business to China's Lenovo Group and Compaq was absorbed by Hewlett Packard.
was a guerilla strategy," Harada said, recalling the Toughbook's launch
in 1996. Panasonic's promotion campaign included driving jeeps over its
computers, dropping them on the ground and dousing them with coffee on
morning TV shows.
At rival Sony, too, signs of a niche strategy
are emerging in a battle with Apple and South Korean brands that are
making gains from a weaker won currency. Combining technologies from
several divisions - from projectors to video cameras and headphones -
Sony's 3D Viewer head-mounted visor gives users the feel they are
sitting in the middle of a 500-seat movie theater.
audience, says product manager Hideki Mori, are those consumers looking
to immerse themselves in computer graphics and high quality movies.
"Demand has been greater than anticipated," he said, declining to give
specific sales numbers.
The two Japanese firms
will show off their wares at this week's annual CES consumer
electronics show in Las Vegas, an event usually dominated by prototypes
for next-generation TV technology. Tsuga is due to deliver the event's
In the past, the Japanese have showcased ultra
high-definition 4K televisions, while Samsung and LG Electronics Inc
have displayed their ultra-thin OLED (organic light-emitting diode)
screens. But, at a price tag likely 10 times that of conventional LCD
screens, consumers will take a while to make the generational leap.
losses at Panasonic, Sony and Sharp mount up. Panasonic has predicted a
net loss of $8.9 billion in the year to end-March, while Sharp, which
has been bailed out by banks, expects an annual loss of $5.24 billion.
Helped by asset sales, Sony should eke out a small profit.
share of the flat panel TV market has shrunk by around a quarter in the
past two years, to around 31 percent, according to the Japan
Electronics and Information Technology Industries Association. Amid a
prolonged strong yen squeeze, the industry lobby expects Japan's share
of the DVD and Blu-ray disc player market to have dropped to around half
last year from nearly two-thirds in 2010. Just 8 of every 100 mobile
phones sold globally are now Japanese. Manufacturers have shifted TV
production overseas, with output in Japan now less than a tenth of what
it was two years ago.
Tsuga, who acknowledges Panasonic is a
"loser" in consumer electronics, has warned his business units they will
be closed or sold if they fail to match Toughbook's success, giving
each two years to deliver at least a 5 percent operating margin.
niche-winning strategy that takes his company away from mass market
products means Tsuga will need fewer workers, investors say. Panasonic
is Japan's biggest commercial employer with a workforce of more than
300,000. It plans to axe 10,000 jobs in the year to March on top of the
36,000 that were cut in the previous year. More big cuts in Japan, where
major lay-offs are uncommon and severance packages expensive, won't be
easy, said Yuuki Sakurai, CEO at Fukoku Capital Management in Tokyo,
which manages assets worth $18.4 billion, but doesn't own Panasonic
"It's like trying to chase the course of a battleship. If
they want to become a light cruiser or destroyer, they'll have to lose
employees," Sakurai said.
will likely keep are those in Kobe in western Japan who build the
Toughbook PCs a category defined by a U.S. military quality benchmark
that serves as a de facto global standard. Its market share is on a par
with Apple's in tablets, with most U.S. police departments willing to
pay as much as $3,000 for the rugged laptops which can withstand bumpy
high-speed chases and other rigours of street policing.
been near bullet-proof. We had a patrol car catch fire and after all
the heat, smoke and water dissipated the computer continued to
function," said Bill Richards, logistics commander for the Tucson police
in Arizona, whose force owns close to 650 Toughbooks that connect
patrol cars with dispatchers, license records and other police
Other customers include the New York Police Department,
California Highway Patrol, Brazilian Military Police and British and
U.S. military, which use them on unmanned aerial drones.
is the bellwether, the most recognized brand. The Toughbook is almost
synonymous with rugged notebooks," said David Krebs, a vice president at
While margins in the global PC market are getting
slimmer research firm IHS iSuppli sees annual sales growth of around 7
percent over the next four years from about 216 million PCs last year -
the premium-price, fatter margin, rugged PC niche is seen growing by
around 10 percent a year to nearly 1.2 million computers by 2016,
according to VDC Research.
Analog edge, digital sameness
the Kobe factory, Toughbooks are put through their paces: hosed down to
test water resistance, baked to 50 degrees Celsius, chilled to minus 20
degrees and dropped on their tops, bottoms, sides and corners.
Harada describes it as an analog edge in digital products.
makes them, the insides of a computer are pretty much the same. It's
the mechanical side that makes us different," he explained.
creators of Sony's 3D Viewer, too, are looking for mechanical appeal as
much as electronic prowess. A second, redesigned model, which is now on
sale in Japan, is 25 percent lighter at 330 grams, has a better grip and
gives users the option of headphones or earplugs, said Mori. "We want
to make it lighter," he added, noting engineers are looking to slim down
the heaviest component, the lenses.
While Sony keeps chasing
consumers, Panasonic is pursuing a business-to-business niche market
model that Tsuga has put at the heart of his revival plan. High on
Harada's target list for the Toughbook are Japanese police forces, which
don't yet buy the computers.
There are no plans, he said, to make cheaper mass market models - which could protect some jobs in the group.
"We aren't going to put it in Best Buy or Walmart. I don't think it would turn out well."
© Thomson Reuters 2012