Japanese electronics firms are investing billions of dollars in R&D activities. As shown in Table 3.1, the top ten electronics firms in Japan invested an average of 7.8% of sales in R&D in 1991. They continue to search for those advanced technologies and components that will assure future competitive advantage in the marketplace.
The recession in Japan affected investment levels only slightly. For example, Matsushita's revenues fell from 7.4 trillion yen in 1992 to 7.0 trillion yen in 1993, with a drop in profits from 363 to 170 billion yen ; Sony's revenues grew slightly from 3.9 to 3.95 trillion yen, but profits fell from 197 billion to 80 billion yen; still, Matsushita's R&D expenditures increased from 418 to 420 billion yen, and Sony's R&D expenditures increased from 240 to 245 billion yen. In contrast, both Matsushita and Sony cut facilities investments 40% for 1993. Despite stagnant or declining revenues and income, most Japanese consumer electronics companies continued to increase R&D expenditures slightly in 1993.
Japanese Major Electronics Firms' Capital and R&D Investments
Overseas Research Facilities
Japanese direct investment in research and development abroad increased significantly during the late 1980s. According to Japan's Science and Technology Agency (STA 1992), over one hundred Japanese private companies with capitalization of over 10 billion yen had established R&D facilities in over 180 overseas locations by 1989. Japan's Ministry of International Trade and Industry estimated that the number of overseas research facilities owned by Japanese companies increased 86.6% between 1986 and 1989, and during the same period the number of researchers employed by these facilities more than doubled, from 3,300 to 6,975 (MITI 1991). In 1992, the STA survey reported 117 Japanese manufacturing companies operating 276 overseas R&D facilities (STA 1992).
The number of Japanese electronics R&D facilities in the United States increased from about 22 facilities in 1987 to nearly 110 facilities in 1992. This shift corresponded to the growing presence of Japanese goods in the U.S. marketplace. Of 150 Japanese facilities in the United States in 1993, over 70% were established between 1986 and 1992 (DOC 1993, 17). A majority of these facilities focus on computers, computer software, semiconductors, telecommunications, television-audio-radio, and optoelectronics.
In 1992, Sony had fifteen R&D facilities in the United States, Fujitsu had eleven, and Matsushita had nine. In addition to moving development activities closer to their markets, Japanese firms set up these R&D facilities in the United States because they recognized the weakness of basic scientific research activities in Japan. To take advantage of U.S. scientific leadership, Japan established R&D facilities near major U.S. university and industry technology centers. This was expected to shorten development cycles and allow early access to new business opportunities (DOC 1993, 23).
In the United States, innovation often comes out of university or industry basic research activities. For example, a large number of new concepts and products have come from such institutions as MIT, Stanford, Bell Labs, IBM, Fairchild, Intel, and Texas Instruments. In contrast, Japanese labs visited by the JTEC panel focused primarily on improving products that already had established markets. University and government laboratory equipment was considered outdated and not as sophisticated as that of corporate laboratories. Since 1981, Japan's austerity budget had cut finding for government laboratories. Most government-funded laboratories had deteriorated with the budget cuts by the time of the JTEC visits.
Instead of relying on domestic university or government basic research, Japanese firms have continued to rely heavily on research from U.S. facilities such as MIT's Media Laboratory. Japanese companies have also continued to establish basic research facilities in the United States. In Japan, the best-equipped industrial labs appear narrowly focused and tightly structured. On the other hand, firms are attempting to improve creativity through the development of more "Western"-type incentive programs. Sony and TDK recently developed reward systems to encourage more innovative research.
Japanese firms are adept at understanding the product opportunities resulting from U.S. research efforts. For example, Apple Computer developed a strategic alliance with Sharp Corporation for the manufacture of the new personal digital assistant called Newton. Sharp introduced its lower-priced version of the Newton nearly four months before Apple was able to complete the "complex" technical developments of the Newton. As one TDK executive explained, "We are very good at making things for our customers, but we do not really understand what product we should make." However, once they learn what to make, Japanese companies are very fast at product development and market introduction.
In the observation of JTEC panelists, the best Japanese industrial labs are comparable with U.S. labs in the nature and amount of equipment. Japanese technical publications are of outstanding quality, but most research is directed at short-term, incremental technical improvements. The work has very pragmatic goals - to solve very specific technical problems rather than invent new technologies. Panelists did not detect an atmosphere of great excitement in the labs. Still, there are several notable Japanese companies committed to the long-term development of future technologies as well as to shorter-term product development. Hitachi's research structure, described below, is representative of the broad R&D capabilities of Japan's most influential electronics firms.