Sharp, Pioneer And Consolidation - Twice

Sharp, Pioneer And Consolidation

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Around the TWICE office we’ve always joked that we would not change the front page of our print issue on deadline “unless Sony buys Panasonic.” (Or Panasonic buys Sony.)

Well, neither happened yesterday, but news about Sharp making a good-sized investment in competitor Pioneer was close enough. We were closing our Sept. 24 issue yesterday when the news broke, and on p. 1 of Monday’s edition we are referring all of our print readers to our coverage on the Web. We have yet to hear from both company’s U.S. executives and reactions from the industry, so this story will change over the next few days and weeks.

2007 may possibly be remembered in the CE industry as the year that this happened, and that Matsushita finally divested itself of JVC with the latter joining forces with Kenwood.

For years we have heard that margins are razor thin in consumer electronics and that top-tier manufacturers need profits to re-invest in next-generation technology. That is what the Sharp/Pioneer deal seems to be all about — teaming up to invest in new technology.

But if I’ve heard this once, I heard this line several times in the past two or three years: “We appreciate the support of ______, _______ and _______ (you fill in the blanks), but the way the industry is changing in five years we may be carrying products from completely different brands or brands we haven’t even heard of yet.”

The implication was that there was going to be a consolidation in the industry, this time on the supplier level. Now, I’m not saying that the Sharp/Pioneer deal or the JVC/Kenwood partnership means that any of these companies or brands will disappear from the scene anytime soon. But, as we saw in the 1980s and 1990s when waves of regional CE retailers bit the dust, this industry is brutal when in comes to competition, and consolidation is not a foreign concept.

The excessive price cuts in flat-panel TV that began during last year’s fourth quarter and all the moaning and groaning from suppliers and dealers was and is not empty posturing. If what someone once called “disruptive” price cutting in CE continues, you will see more partnerships like Sharp and Pioneer, or companies deciding to opt out of consumer electronics due to the lack of profitability.

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