Philips Success at Sharp led to world success   jap1

 

We missed the last Shinkansen…  again..

But passed the Japanese test, and the world beckoned

( this success story is not connected with ELA)

Tokyo, Japan - Rainbow Bridge

Please read on....  jap2


 

In 1985 Philips was big in semiconductors in Europe, but nowhere in Japan, with the exception of the Dolby Chip that was supplied by Signetics Corp, of Sunnyvale, Ca and supplied to Japanese Audio makers, and even this was thanks to buying the Signetics company…   Actually, the share of Philips business in Asia was very small in total, and this had to change.  Many Philips divisions and other companies considered Asia as Singapore, Taiwan, hopefully China, but Japan was “too closed”, the manufacturers only bought their own companies’ products,  “vertical integration” was the way of Japan.  Yes it was, but with some exceptions.

How could Japanese companies be reached, and where to start?.  As Philips considered its strategy, its clear strength was in semiconductors for TV, and Philips supplied all the TV makers in Europe,.. but  likes of Sony, Panasonic, Toshiba were making inroads fast. Where would Ferguson, Thomson, Grundig, Nokia TV be in the future after the Japanese onslaught? …. , and if they closed, where would that put Phillips semiconductor business?

 In fact while Philips semiconductors also supplied Philips TV division etc, the sales to manufacturers companies “outside of Philips” were much bigger than the sales inside Philips, and what would happen if these sales were lost to the powerful vertically integrated Japanese business? And then what might happen to Philips?  Of course the fact that Philips had a strong TV system knowhow was built into its chips, hence their design strength, but would this work in Japan also?.. and where to start?

Thinking wider,  the total Asian share of semiconductor sales  low,  and when this was considered, where should we set up an Asian office  than… free trade area of  HongKong?... industrious Taiwan where Philips already had several factories ? …    or  Japan?

 No other division had done so, Japan was “too hard” to penetrate, the Philips Japan office was mainly a purchasing office.  ( there was a famous exception, the Philishave electric razor, but that might be another story.. )

At that time, Philips bought millions of VCRs through its Tokyo office. While Philips Europe was still gamely promoting its (much better? ) V2000 VCRs, Panasonic  and Sharp were supplying VHS to Philips USA sold under the Magnavox brand… and those who are old enough to remember know who won the VCR battle.

So Philips took a strategic decision that its Asian semiconductors operation should be in Tokyo. Since Asian business was dominated by Japanese companies, if we could sell to Japanese companies we could sell to Asia, and the world. It was clear, we must set up our office in Japan, even if it’s expensive, get a success in Japan, then build on it. And it was found that Sharp was one of the few big TV companies that did not make its TV semiconductors in-house, they were supplied by Toshiba among others. Could this be our best target? Philips then sent a senior technical manager from Eindhoven to Tokyo, who recruited a team of engineers to support this and we were ready to start.

 

 

A high level meeting was called between Philips and Sharp,  and the meeting might have gone something like this, but probably much more discreetly ….

“ Japan Inc. is killing the rest of the world electronics industry, the balance of trade is so bad that our governments are getting involved to correct it” 

“ Maybe, but  why are we meeting today? What can we do?”

“well, those great VCRS that we buy from you are worth millions and we could do with a little trade rebalancing ourselves… “

“ what did you have in mind?”

“ well, we are #1 in Europe for TV ICs and how about you buy those chips from us for your European market for a start? “

“OK, we will tell our engineers to have a look at them”

“ good meeting …  lets go for teppan yaki ”

----------- 

Cut to some months later, the countryside town of Yaita, Tochigi prefecture. Its only industry is the Sharp TV factory, there is one small hotel, few bars and everyone in Sharp works from morning till night, with dormitories for the engineers…

And these engineers have now been asked by senior management to consider changing from the reliable Toshiba chips from the Toshiba people they all know and drink with, ..… to some chips from Europe?,.    really?

“Its like this,  it’s our boss’s boss’s instruction”.    You can imagine how this went down with the engineers, and how many ways they could find to reject this decision for “sound technical reasons, and Japanese products have higher quality.”   This is just what they did.

Many faults that have been found with the Philips chips.  Significantly, several faults were from tests in TVs for Malaysia ( Borneo), Thailand, China etc, where the same European PAL TV standard is used but the transmitters were not properly maintained, electricity supply voltage fluctuated widely, illegally copied VCRs tapes were expected to work well,   

So this work with Sharp Japan was not only about business in Japan, it had already become business in Asia. The world had suddenly opened up to Philips semiconductors, these were new faults that had never been seen in the well organised German market…    Some product divisions had been known to say “ we have never seen this problem at Grundig”  but it was clear that we had to embrace these complaints with both arms and fix them.  We could then get into not only the Japan market, but the world market, by working with a world-class Japanese customer such as Sharp.

So yes, tonight is another long meeting, an unfriendly customer where we had to prove ourselves,  and why should they make it easy for us..  All of us in the meeting knew what time the last shinkansen left, so another agenda point was brought up, and another, so that at 7.55 pm it was too late, the meeting was promptly ended and we took the stopping local train back to Tokyo… again. 

Of course after fixing the problems, and sending the responses/ improvements,  another list of new faults was presented to us, sometimes the next day, but the development staff in Philips Nijmegen, Holland,  never gave up..

 The Philips TV chip design was far ahead of the Japanese chips for cost-effectiveness, few additional components etc, but had not been proven for the demanding Japanese customers. In fact their complaints were entirely correct and a precious input to the design process...  we learned about quality, and problems in the Asian market directly from a customer who would go on to buy millions of chips from us. Their huge factory in the Malaysian jungle made TVs at a faster rate than any factory in Europe, and used Philips chips.

This business was an eye-opener to Samsung TV, they now had an alternative to their Japanese supplier, they designed in the chips, other Japanese companies later also stopped the in-house production as it was becoming less cost effective.

Philips had now been proven, via a world class customer.  

It was all worth it, Philips had to open two more production lines in Europe in Caen and Hamburg to meet the demand, as its worldwide share to the PAL system TVs reached 60% .     #1 global share

 

Sequels

One evening another meeting at Sharp was going on, and we were asked, “would we like to go for a drink/ karaoke?…”  Philips Japan staff said, “we’d  better say yes” …  where on earth to? Did we have to stay all night?..We hadn’t brought our toothbrushes.   Well we went to some place in the Tochigi countryside , and we were asked, “do you think Philips could consider our TVs for USA… different standard”  .  what an opportunity…!  Philips went on to design its USA chip with close cooperation with Sharp, the story repeated but now we were being allowed to catch the shinkansen home .

The final signature meeting in Holland with the key Sharp director was organised perfectly by the Nijmegen plant director , he lined up his management in seniority order to greet them,  signed the deal, and on the way back to Schipol Airport in the Philips Cadillac the Sharp director asked, “Do you think you could do something for our VCR…? ”

 

( copyright) Peter Bacon 2011

Key Points.  jap3


have advanced technology in an important area

choose the target(s) carefully 

have the determination to succeed

accept, even embrace, complaints

adapt to customer timescales

respond fast

keep responding

be ready for the volume production