Weekend news round-up: Twilight of Japanese tech giants, ink spills in e-book wars

14 Jul 2014

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In our round-up of the weekend’s top tech news, Apple’s onslaught on the consumer electronics industry has led to the demise of the once-powerful Japanese tech industry; Amazon’s battle with Hachette is the latest skirmish in the e-books war; and Samsung’s real nemesis could be Xiaomi.

Apple bites into confidence of Japanese electronics firms

Japan’s electronics industry, once the envy of the industrialised world, has found itself in choppy waters while upstart players like Apple, which it once viewed as a minnow, are devastating its market share.

A report in The Economist indicates that Sony, which has been sold to a private equity firm, has seen its market share fall from 10pc to 2pc.

“Japanese firms have blundered for the past decade. They continued to obsess about fancy hardware, neglecting fast-growing software and services (such as Apple’s iTunes) and failing to spot consumers’ changing tastes. They were slow to recognise the developing world as a fast-growing market and not just a low-cost manufacturing base, says Peter Kenevan, a consultant at McKinsey in Tokyo.

“The Japanese firms now have some hard decisions to make, about which existing products they should give up on and which new ones to pursue. Sony’s bosses are reportedly studying reforms made by Philips, a Dutch firm which has quit a number of poorly performing businesses. Last year it got out of making televisions, and a chunk of its lighting division is next out of the door.

“Panasonic is already making an abrupt change of direction. Under Kazuhiro Tsuga, its newish chief executive, it is exiting both plasma televisions and consumer smartphones. Its new focus is on making equipment for energy-efficient homes.”

A war, but not a very novel one

Authors are finding themselves caught in No Man’s Land in a battle that is raging between e-commerce kingpin Amazon and America’s fourth largest book publisher Hachette. The New York Times reported that this battle is just one dimensionof an epic war over the digital future of publishing in which the anti-trust case against Apple was a recent skirmish.

“From household names to deeply obscure scribblers, authors are inflamed this summer, perhaps more deeply divided than at any point in nearly a half-century. Back then, it was the question of being a hawk or dove on Vietnam. Now it is not a war but an internet retailer and its unparalleled grip on the cultural machinery that is provoking fierce controversy.

“At first, those in the publishing business considered Amazon a cute toy (you could see a book’s exact sales ranking!) and a useful counterweight to Barnes & Noble and Borders, chains willing to throw their weight around. Now Borders is dead, Barnes & Noble is weak and Amazon owns the publishing platform of the digital era. The company founded and still run by Jeff Bezos dragged the publishers into modern times, forced them to digitize and urged on the Justice Department in its 2012 antitrust suit against the publishers and Apple. The conflict is unrelenting.”

Samsung’s dark cloud

To many, Korean electronics giant Samsung seems unstoppable. But there is a dark cloud on the horizon that threatens all of its gains, according to a very sharp and insightful blog by Ben Evans.

If Xiaomi selling 50,000 tablet devices in under four minutes is anything to go by Samsung faces the threat of commoditisation of the Android ecosystem by the rising swarm of hardware makers in nearby China.

“Samsung, Apple and Microsoft are all strong in two layers: Samsung in components and devices, Apple in devices and operating systems and Microsoft in operating systems and application software. Each of these companies has cross-leveraged these adjacent strengths to create better products and a stronger market position. Samsung has used the scale of the component business and access to those components to drive the devices business and vice versa, despite failing, mostly, to create compelling software differentiation. This leveraging of scale, combined with some great execution, has taken it to at least half of the total Android market. 

“The problem is that Samsung is increasingly competing with another sort of scale effect – it is competing with the entire Shenzhen ecosystem. Before, it was competing with individual companies (many of which happened to use that ecosystem), and like Nokia before it was fortunate in the relative weakness of most of its competitors. As for Nokia, that luck was bound to run out. Now Samsung is starting to face competition with new companies who are finding ways to build new types of handset businesses on top of that ecosystem – taking that ecosystem and using it to unbundle Samsung.

“The company that everyone talks about here is Xiaomi, which has created the skills to build both good services and software and good handsets. Xiaomi has faced the fork problem by working out how to dance right up to the edge without going over – Hugo Barra described it as a ‘compatible fork’. Rather than turning Android into a fork, it has, so to speak, polished it, adding features and services without breaking anything. And so it has created real differentiation at the operating system layer without losing access to Google services, which its devices outside China all use.”

Beats also battles China

China isn’t only a concern to Samsung. Apple Insider reported that headphone maker Beats has filed suit against a number of Chinese counterfeiters, alleging trademark infringement and seeking damages that could run into the billions of dollars just weeks before the company officially becomes an Apple subsidiary.

“Attorneys for Beats paint the counterfeiters as part of a sophisticated ring that has constructed their business to operate in such a way as to maximize profits while minimizing the chance they will be discovered by law enforcement, shipping fake Beats products ‘in small quantities via international mail to minimize detection by U.S. Customs and Border Protection’ while disguising their identities. Counterfeit sites like those Beats is going after are estimated to generate more than $135 billion in annual sales, the company says.”

Delicious deal for Square

TechCrunch reported that Jack Dorsey’s mobile payments company Square is in the process of acquiring curated food delivery start-up Caviar for at least US$100m.

Payment processing company Square launched Square Order in May to bite into the food delivery service industry. There have been speculations as to whether the technology was built in-house or was part of another acquisition or third party.

“Currently, Square Order offers a mobile app for consumers to order food for takeout. But it requires the consumer to pick up their own order. Caviar, by contrast, handles all pickup and delivery for the restaurants it partners with, lowering the fixed costs associated with delivery and could provide a big value-add to potential Square restaurant partners.”

Japanese sunset image via Shutterstock

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com