The Official Wirewize Blog

Last week’s news that the maker of the best flat-screen TVs was getting out of the business came as no surprise to anyone living in the age of Wal Mart.  Even before the economic downturn, the electronics industry was already well along the way to a new market reality where quantity, not quality, is the point.

Would anyone bother to say this anymore?

In general terms, producing something of “better” quality is about incurring cost, in both human and monetary capital.  Higher quantity, as a rule, is based on saving cost wherever possible.  In a world where a new DVD player is cheaper than a night out at the movies for the family, the disconnect between these two philosophies — and the near term future of the electronics landscape — becomes pretty obvious.

To demonstrate, let’s set the WABAC machine to a simpler time and place.  If you don’t remember the first viable time-travel technology, we’ll wait.

There?  Great.  Take a look around and acclimate yourself. The president just resigned from office. Homer and Marge are thinking about high school graduation.  There’s a wire between your remote control and your TV.

The home electronics boom is in full flower.  Less than 20 years after Sony first broke into the American market, “Made in Japan” has stopped being shorthand for cheap, shoddy goods.  Now it’s a mark of techno cool  So cool in fact, that in just a handful of years, the US consumer electronics industry will basically sell out and be sold out to Japan.

The rising new stars of that technology era, companies like Sony, Sharp, Panasonic, Hitachi and Toshiba, were all begun by engineers, electrical repairmen, even telegraph makers. The kind of people we affectionately know today as geeks.

Having conquered the US market by fair means and foul, the Japanese companies competed with each other for this greatest of commercial prizes in exactly the way that engineering geeks would be expected to compete – by out-doing each other in feats of engineering.

Back then, companies would spend trillions of yen coming up with ways of making a TV’s color more accurate, and reducing an audio receiver’s distortion by a hundredth of a percent.  Engineers care deeply about these kinds of things, and for a long while, it was assumed that consumers did too.

Correction: Was Outstanding

Coming back to the present day, we see that history does in fact repeat itself in the way that noted economist Karl Marx described; first as tragedy then as farce.  Today’s Japanese economy is tumbling faster than its own pickled finance ministers, and the original stars of Japan’s export-driven economy – consumer electronics – are under siege by a new Chinese competitor that’s just as aggressive as Japan was a generation ago. And many times the size.

What’s more, China Inc. and its massive manufacturing economy doesn’t care much about foot lamberts and signal to noise ratio.  It cares about making and selling as many things as possible to as many people as possible.  The best way to sell a lot of things to a lot of people is to make them as cheap to buy as possible.  The best way to make something cheaper is to cut corners – i.e., reduce the quality.

Which brings us back to the disconnect, or better put, the “problem” of high quality.  And the bigger problem for the many manufacturers – most of them Japanese – that will have to face the changing reality, and find viable ways to live within it.

Now they don't even bother to do that

With consumers in America now voting with their pocketbooks or what’s left of them, it’s no wonder that $4,000 TVs aren’t competitive with $1,500 TVs, no matter how incrementally better they are. For the rising middle classes in China, India and other developing markets, cheaper will trump better any and every day, at least for the immediate future.

Which is bad news for every electronics company that owes its historical success to the idea of making better/cooler stuff than the other guys.  Which is to say just about all of them. The bone yard of the electronics world is littered with brands and products long forgotten. Nobody but diehards and collectors remember Motorola TVs, Fisher stereos, Akai VCRs and DBX processors.

Pioneer just left the TV business. JVC just consolidated its US operations. Sony just announced serious layoffs, as did Panasonic. Yet at the same time, the TV market continues to grow.  That means more people are buying new sets based on price, not performance.  And not caring much about foot lamberts either.

Companies that used to be good at invention had better learn to be good at re-invention, and pronto.  Otherwise they’ll find themselves alongside the same US electronics companies that they gleefully battered all those years ago — on the pages of eBay.
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