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The Koreans, led by Samsung and LG, have for years ruled India’s consumer electronic space, virtually pushing out the Japanese giants to grab more than 50 per cent market share. But Japanese firms, after concentrating on China for a few years, seem to be back with a vengeance.
Over the past 18-24 months, Japanese consumer electronic giants — Sony, Panasonic, Hitachi, Daikin and Sharp — have announced investments of over Rs 8,000 crore in the country. These are meant for setting up manufacturing plants, marketing and product innovation for the local market. The Korean firms, in comparison, have so far invested about Rs 4,000 crore and announced fresh investments of about Rs 2,000 crore.
Japan’s push in the Indian market is only reinforced by the visit of its Emperor Akihito, who arrived here on Saturday for a week-long official tour, one undertaken after 53 years. The fact that Prime Minister Manmohan Singh personally received the monarch, deviating from the usual practice, highlights the importance of Akihito’s India visit.
Also underscoring the visit’s importance for companies like Hitachi, Mitsubishi, Mitsui, Nippon, Sumitomo and Suzuki are associations like the Japan Chamber of Commerce and Industries in India, and Assocham, which have published welcome greetings and organised several meetings.
Japan’s business interest in India is not limited to consumer electronic companies alone; fast-moving consumer goods (FMCG) firms, for the first time, are considering entering the market. Food & beverage companies like Nissin Foods (maker of Top Ramen Noodles) and brewers like Suntory, too, are considering stepping up India investments.
These should also be seen as Japanese companies’ move to hedge their bets — reducing over-dependence on China by investing in an alternative market with potential growth.
“Japanese companies are looking to balance out their investment in Asian countries. It’s the anti-Chinese sentiment that is driving Japanese investments to India. After years of focusing on China, these firms are now taking a more regionally-balanced approach,” said a consultant with a global advisory firm.
Even as businesses in developed markets have been slowing, consumer demand for Japanese consumer brands continues to be high in India. Panasonic, which reported net loss of $7.5 billion in the financial year ended March 2013, targets to return to profits in 2013-14 by trimming unprofitable businesses and focusing on emerging markets like India, where the appetite for its products is growing.
“The growing young consumer base in India, a potentially huge-growth economy, and the Indian government’s efforts to woo Japanese investment are key reasons for the manifold increase in interest. Recent investment announcements by Japanese companies are an indication that the Indian market is set to drive their growth,” said a top-level consultant at Protiviti Consulting.
Panasonic, for instance, has already announced a Rs 1,500-crore investment in the country to set up a second manufacturing facility, for business-to-business products like energy and high-definition video conferencing solutions. It has also lined up investments of about $250 million for marketing and advertising by the end of March 2015. The company has set up its first manufacturing unit in Haryana at an estimated investment of Rs 1,000 crore.
Panasonic is not alone. Hitachi has announced investments of about Rs 4,700 crore by March 2016 in setting up manufacturing plants in the country. It hopes to exceed Rs 20,000 crore in revenues by 2015-16, an announcement made by the company’s president Hiroaki Nakanishi at its recent board meeting in India.
Realising Korean firms like Samsung and LG had swept the Indian market with aggressive pricing, local production and huge product offerings, most of these Japanese consumer electronics reduced prices of their products by 10-20 per cent last year.
Akai, which tried entering the Indian market a third time in 2010, is also playing on pricing to gain a foothold.
Sony’s head of sales for India, Sunil Nayyar, had earlier said in an interview with Business Standard that India would continue to be a high-growth market for the company. According to company executives, for Sony, the India unit in 2012-13 jumped to the fourth position, behind only the US, China and Japan ones. This was on the back of double-digit growth rates seen in categories like laptops and flat-panel TVs. Last year, Sony India’s sales rose 30 per cent to Rs 8,206 crore. The company aims to triple its India revenue to Rs 20,000 crore by 2015.
While Sony has yet to decide on setting up a plant in India, Sharp has announced one to be set up with an invest of about Rs 700 crore for manufacturing air-conditioners (ACs), refrigerators and microwave ovens. AC maker Daikin, which is growing at an average 20 per cent a year, has also announced it will invest Rs 330 crore in its overall expansion in India.
Industry experts say India’s contribution to the revenues of Sony and Panasonic currently is three-five per cent; these companies plan to raise this to at least 10 per cent over the next few years, especially because developed markets like North America, Europe and Japan have slowed down.
