Japan tech needs M&A but patent war more likely

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Japanese schoolchildren often hold hanseikai, or "reflection talks," to discuss what they did wrong during a play or a sports meet.

There's a lot of that kind of introspection going on among Japanese tech executives at the Consumer Electronics Show this week, where the dominance of Sony Corp and Panasonic Corp seems to be a thing of the past, usurped by South Korea's Samsung Electronics Co Ltd and LG Electronics Inc.

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 this 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 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.