Japanese schoolchildren often hold hanseikai, or reflection talks, to discuss what they did wrong during a play or a sports meet.
There was a lot of that kind of introspection going on among Japanese tech executives at the Consumer Electronics Show last week, where the dominance of Sony Corp <6758.T> and Panasonic Corp <6752.T> seems to be a thing of the past, usurped by South Korea's Samsung Electronics Co Ltd <005930.KS> and LG Electronics Inc <066570.KS>.
To regain their competitive edge, Japanese electronics makers should be looking to mergers and acquisitions, cost cuts and other moves to boost their market share abroad, according to government officials, investors and bankers. But veteran executives tend to be resistant to change, and the many factions found in Japanese conglomerates often slow decision making because of the value placed on consensus building.
Some investors fear that a brighter global economy in 2010 will delay transformative deals, and Japanese firms will instead get distracted by patent fights to protect their existing technologies.
Everyone knows what needs to be done, but execution has always been the issue in electronics, said Atsuto Sawakami, a fund manager at Sawakami Asset Management Co in Tokyo. I'm not holding my breath. There are better places to invest.
At the world's biggest gadget fest in Las Vegas last week, Japanese executives privately voiced a sense of crisis.
Just a few years ago, one could walk through the Samsung booth feeling secure and smug, said a Toshiba Corp <6502.T> official. But each year, the booth becomes more showy, the products better-designed. And the price is still a challenge to match, he said, speaking on condition of anonymity.
The rise of Korea Inc at the expense of Japan is reflected by Samsung's aggressive target for flat-screen TV sales, at a time when Sony Corp is struggling to turn a profit. Investors have taken note; Samsung's shares surged 77 percent in 2009, twice as much as Sony's 39 percent rise.
Investment bankers in Japan love to sing the praises of a hypothetical merger of Sony and Sharp Corp <6753.T>, or Sony and Hitachi Ltd <6501.T>.
They are eager for more integration among Japanese firms' system chip and hard drive businesses, especially at a time when the global tech sector is also consolidating. Hardware, software and services firms are coming together to become more competitive, such as Oracle Corp's planned purchase of Sun Microsystems Inc and Hewlett-Packard Co's deal for network equipment maker 3Com Inc .
A combination of Sony's brand and Hitachi's technology and research capabilities could lay the groundwork for growth for the two loss-making companies, one banker said.
As the TV market becomes commoditized, Japanese firms are under pressure to win back market share through competitive pricing. Some, such as Toshiba, plan to outsource more production.
Sharp, which makes Aquos brand LCD TVs and supplies panels to Sony, Philips and Toshiba, aims to make its LCD plant in Nanjing as cost-efficient as any other local plant.
But there is a limit to such cost cuts, and Japanese companies need to be at the forefront of new technologies, if they are to remain competitive and survive, executives said.
The South Korean companies are overwhelmingly stronger when it comes to cost efficiency, Sharp President Mikio Katayama said on the sidelines of CES. We cannot win unless we do something only we can do.
Analysts expect patent wars to escalate as Japanese makers cling to key technologies in their grip.
Sharp is locked in a web of suits and counter-suits against Samsung over liquid crystal displays.
One of the main costs behind premium LCD TVs is the light emitting diodes (LED) used in the backlight, and Sharp is fighting to protect and leverage its patents.
LED technology makers have not been very aggressive about asserting their patents, said Katayama. That is going to change.
While the Consumer Electronics Show was brimming with flashy 3D TVs and products that Japanese firms are developing to win back their reputation as technology leaders, investors aren't sure it's safe to plough new money into their shares.
Sony is beginning to look interesting, if its e-reader can win more market share, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co. But in general, Japanese tech firms have a long way to go before they can compete in BRIC nations, referring to Brazil, Russia, India and China. For true growth, drastic consolidation is necessary, and I don't see it happening.
(Reporting by Mayumi Negishi; Editing by Tiffany Wu)