Onkyo’s decline is a warning for Japanese manufacturers

Not so long ago, the shelves of major electronics stores were filled with stereo systems, speakers and other products bearing the logo of Onkyo, one of the world’s leading manufacturers of audio equipment. Japan.

But over the years, the electronics giant has gradually fallen on hard times. Then in May, Onkyo Home Entertainment Corp. filed for voluntary bankruptcy.

Onkyo’s fall from grace not only reflects changes in the way people listen to music, but also signifies a common problem shared by Japanese manufacturing companies: the inability to change with the times. And that kind of pride can be fatal.

“The era is over when simply producing quality items without putting in any other effort leads to good sales,” said Atsushi Osanai, professor of economics at the University’s Graduate School of Business and Finance. Waseda.

Onkyo is a good example.

Onkyo’s predecessor was founded in Osaka Prefecture in 1946, a year after the end of World War II. Its flagship products were loudspeakers.

After consumers began to appreciate vinyl records in the 1960s, Onkyo focused on producing machines that played vinyl. It has launched a succession of quality products, wowing fans of audio gear.

Onkyo’s players could play sounds ranging from low to high frequencies in a balanced manner. Consumers appreciated that their records sounded natural and authentic.

Most of its products, considered luxury but not top-of-the-line ranges, were affordable and time-tested, allowing a wider variety of music lovers to spin records.

Onkyo reacted quickly to changing trends.

“He (Onkyo) acted earlier than most after CDs hit and smaller stereo systems made waves in the 1990s,” said audio equipment critic Kenzo Konoike. “At the start of the Internet age, it was just as fast to deliver hard drive-based audio and online services. It also started quickly in the music distribution business.

Seeing the iPod hit the market in the early 2000s, Onkyo released speakers for the popular portable player early on.

But it failed to keep pace with all the changing trends, and Konoike argues that Onkyo made a “huge mistake”.

“Subscription offers have been widely accepted amid the spread of smartphones,” Konoike said.

The advent of smartphones has dramatically changed the way people listen to music. Young people and others are now enjoying music on YouTube, Spotify, Apple Music and other subscription offers instead of CDs.

And Onkyo missed the mark.

The Recording Industry Association of Japan conducted a survey in December to determine how Japanese consumers between the ages of 12 and 69 listen to their music.

Respondents were asked how they had played their music in the past six months. Multiple responses were allowed.

About a quarter said they still use CDs, while 30% use subscription apps and 45% access music through YouTube.

Although demand for CDs and CD-compatible stereos has declined over the years, smartphone-connectable players and speakers have not seen a surge in sales.

Onkyo wasn’t the only loser.

According to data from the Japan Electronics and Information Technology Industries Association, the market scale of audio and voice products fell by half, from 152.1 billion yen ($1.11 billion) in 2011 to 72.3 billion yen in 2021.

During this period, Sansui Electric Co., one of Japan’s top three acoustic equipment manufacturers, went bankrupt in 2014. Another, Pioneer Corp., had no choice but to sell its audio and video activities at Onkyo in 2015.

Konoike said manufacturers have struggled due to the growing number of high-performance music players now available in the market.

“Some products in the past got (rated) 50 or 70 out of 100,” he said. “There are now cheaper machines rated at 99, making it increasingly difficult for enthusiasts to tell the more expensive ones from their lower-priced counterparts.”

But Konoike pointed out that there is still steady demand for the premium lines.

“Products targeting a tiny fraction of audio equipment enthusiasts aware of the differences between 99-point items and 100-point machines enjoy strong sales,” Konoike said.

On May 13, the day Onkyo announced bankruptcy, Teac Corp., a manufacturer of acoustic equipment known for its expensive Esoteric brand, reported consolidated sales of 16 billion yen, up 9.7% from the previous year, for the fiscal year ending in March. 2022.

Dynamic exports were cited as the reason for the positive financial results.

Teac has more than one ultra-expensive music player priced over 1 million yen, such as a 2.8 million yen CD player released in 2019.

“From the perspective of the traditional ‘sho’, ‘chiku’ and ‘bai’ divisions, products in the highest category ‘super-sho’, as well as those in the lowest category bai intended for children who do not have no smartphone, survived,” Osanai said. “Chiku mid-grade products have been killed in the audio equipment industry.”

Osanai pointed to Onkyo’s strong tendency to brag about its outstanding manufacturing technology as the source of its failure, although he acknowledged that the company had attempted to forge ahead with reform to some extent. in response to changing market conditions.

He said such extreme attention to build quality is a typical problem for Japanese manufacturers.

“The successes of the past are said to contribute to the rigidities of the next era,” Osanai said. “Japanese companies, unfortunately, have refined skills, so it takes time in many cases for them to forget their past successes in manufacturing.”

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