Why to Be Glad America Isn't Making TVs Anymore

Panasonic"The Japanese consumer electronics industry is one of the most prominent industries in the world and is the world's largest electronics manufacturer ..." So begins the Wikipedia entry on the "electronics industry in Japan."

And you know what we should be saying to that? Good riddance. They can have it.

Despite all the complaining we used to hear in the 1980s about how Japan was "stealing American jobs" and "ruining American manufacturing" -- the same complaints we hear today about China -- it isn't an industry that was worth keeping.

Panic at Panasonic

On Friday, one of the leading lights of Japan's vaunted electronics industry -- Panasonic -- warned that its annual earnings report for 2011, due out in March, is going to contain news of a $10.2 billion loss.

PanasonicThis might come as a surprise to a lot of folks who lamented the loss of America's television manufacturing industry in the 1980s and 1990s. But to anyone who's been following the industry since it moved offshore, it's hardly news that the business of making televisions hasn't exactly been tuning in stellar profit margins.

In fact, most of the manufacturers that consumers love for the high quality of their TV products, investors loathe for the low quality of their profits.

According to Panasonic, almost its entire loss is attributable to writedowns of the value of the firm's Sanyo Electric subsidiary. The company lost money in three of the last four years, but you can't even blame the financial crisis for that. Fact is, for the past 20-odd years, Panasonic has only rarely posted a profit margin greater than 3%. And it is hardly alone in this.

Last week also saw Sony (SNE) warn of a bigger annual loss than previously feared (which also cost Sony's British CEO, Howard Stringer, his job). And like its Japanese TV rival, Sony has long struggled on the profits front. It hasn't reported an annual profit since 2008, and usually makes do with profit margins of 3% or less as well.

'L' is for Losses

Sharp (SHCAY.PK)? Toshiba (TOSBF.PK)? Hitachi (HIT)? Across the length and breadth of the Japanese electronics industry, most of these firms consider themselves lucky when they can earn a penny or two on a dollar's worth of sales -- and all too often, they don't make even that. In fact, the only thing more common in Japan's electronics industry than lousy profits reports are management promises to reverse the trend -- as when Sony's new boss promised to deliver "a V-shaped performance improvement" last week. For the past 20 years, though, the letter of choice has been more like a capital "L".

Viewed in this light, it's hard to complain too much about how Japan "stole" the high-tech electronics business from the U.S. It's probably more accurate to say that they took a low-margin business off our hands -- setting themselves up to face cut-rate price competition with the likes of Korea's LG and Samsung, and China's Haier and Hisense.

Meanwhile, freed from the dead weight of a low-margin, commoditized television industry, American companies like Apple (AAPL), Corning (GLW), and Google (GOOG) have instead innovated and developed new technologies, and new products, with correspondingly beefier profit margins.

Apple's iPhones and iPads are the most obvious examples -- and the most obvious examples of new products changing how Americans watch "TV" on the new small screens. But there's also Corning, which started off making the glass that the TV makers needed for their new lines of LCD television sets. And Google, which took the even more profitable road of avoiding manufacturing, and focusing on developing software to power the smartphones that now compete with Japan's televisions ... and our own Apple iPhones.

When you consider that both Apple and Google regularly report net profit margins in the neighborhood of 25%, while Corning boasts an even more impressive 35% net, it's pretty clear which country gets to claim the "W" in this contest... and why Japan gets stuck with the "L".

Motley Fool contributor Rich Smith does not own shares of any company mentioned above. The Motley Fool owns shares of Apple, Corning, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Google, and Corning. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.

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gvolkland

America has forgotten how important manufacturing is. You are more likely to improve a product that you are making than one you are trying to play catch up with and design from scratch. When you work with something day after day you learn what its short comings are and you learn how to improve it. Manufacturing suports the insurance industry, the shipping industry, it supoorts cities by paying taxes directly and the people who work there pay more taxes. It also suports banking, other manufacturing businesses, lawlers, accountaints, the fuel industry, and electricity production, personel businesses, mines and farmers for raw materials, the chemical industry and the list goes on and on. From the Wealth of Nations, the three bedrocks are farming, mining and manufacturing and maybe today we could add a forth one and that would be intelectual property. i would submit that each is dependent on the others. Any manufacturing is important, certainly we should be in the ones that turn a profit, but to blindly say we should not go there is short sighted. Maybe we could automate better that the Japanese and the Chinese, maybe we can figure out a whole new way to make them using electronic ink or something else. But I suspect we will not lead the revolution in 3-D systems if we and not making 2-D systems.

February 20 2012 at 11:45 AM Report abuse rate up rate down Reply
zattico

it would be better for america to produce tv than not to, lets be competitive again in everything

February 12 2012 at 11:47 PM Report abuse +1 rate up rate down Reply
red94gt

If it was such a low margin enterprise, why did they want it.

February 10 2012 at 3:54 PM Report abuse +1 rate up rate down Reply
dennispelon

Actually an American TV company is relocating in Michigan now that we have a governor that understands and supports business. TV's will be made in America again , more cars will be made in America (if we can pry the liberals from their foreign cars) more houses can be sold and more investments made as we rid ourselves of the shackles imposed by Obama, Pelosi and Reed government can be removed and the real recovery can begin not the phony recovery touted by the Obama regime .

February 09 2012 at 10:44 PM Report abuse rate up rate down Reply
chief two belly

No matter how you look at it we still lost alot of jobs.
This artical is short sighted.

February 09 2012 at 12:49 PM Report abuse +1 rate up rate down Reply
racaneer

This guy's got to be a class 4 idiot. Any industry that creates jobs is worth having. I just found out that a TV called Element is being made in Michigan, and they say they're good. The American Public has been brain washed by the liberal media to think that anything made in this country is no good. Wonder how they'll feel when they take over the news media industry?

February 07 2012 at 8:23 PM Report abuse +1 rate up rate down Reply
hduplease

what a lame article, whether they male ,,money or not, look how many jobs they give is it better to have americans working and corps making a little or let it go to japan and zero benifit to america

February 07 2012 at 5:14 PM Report abuse rate up rate down Reply
Craig

I see. So the failure of the Japanese to innovate just like the American auto manufacturers causes it to repeatedly lose money while American products like apple and japanese cars sell well. How about this. Develop superior procucts here and keep up the R&D. Give the same trade consideration for foreign imports as they give us for our exports. Put tariffs on dumped and cheap wage products. Use that funding to give tuition free education to Science majors, and increase tuition on economic manipulator majors. Government should identiufy and fund cutting edge US industries and take its share of profit in return
.

February 07 2012 at 4:37 PM Report abuse +1 rate up rate down Reply
1 reply to Craig's comment
bggdg

Yes, government is great at predicting the future.

LOL!

February 08 2012 at 9:06 AM Report abuse -2 rate up rate down Reply
NORTHSTAR IND.

Oh so this is supposed to make us feel all warm and fuzzy inside. These articles are a joke America needs jobs if the companies take a loss BFD it is not up to the workers to insure the company makes a profit. We have sent and keep sending jobs overseas knowing we need to keep our people working. I hav seen the Homeless population grow and grow I cannot figure out what our Governnent does not see. Most of these people want work though they are not qualified for the high paying jobs most of us have. But they surely can package, ship and do all the small things this way at least they can have a paycheck also. PLEASE HELP CREATE JOBS IN AMERICA FOR AMERICAN PEOPLE THAT IS WHAT WE NEED !!!

February 07 2012 at 3:59 PM Report abuse +1 rate up rate down Reply
Sandra

It's destructive to become so enthralled with high-paying glamour careers that the critically important but unglamorous jobs with only adequate pay are disdained. It's fine to pursue the high-status occupation, but never forget that all societies are based on a foundation of unpleasant, dull, unglamorous, and necessary jobs.

February 07 2012 at 3:39 PM Report abuse rate up rate down Reply
1 reply to Sandra's comment
docmetcalf1955

i build and maintain equipment used to construct and repair pipelines and oil infrastructure, none of you know who i am, i like it that way

February 10 2012 at 7:15 AM Report abuse rate up rate down Reply