BUSINESS ABROAD: Giant of the Midgets

Japan’s fast-growing electronics industry scored a notable success. Under a threeyear, $8,000,000 contract, Tokyo Shibaura Electric Co. began turning out upward of 75,000 transistor radios, 800,000 transistors, and 1,000,000 vacuum tubes annually for International General Electric, to be resold under the I.G.E. name in Europe, Asia and Africa. I.G.E. was the second major U.S. electronics company to decide to make a deal this year with the Japanese. In April Motorola put on sale in the U.S. a $29.95 shirt-pocket-size transistor radio with most of its parts made in Japan. Among the Japanese parts: a tuning device so small that no U.S. electronics concern has yet been able to mass-produce it. Last week Motorola said the tiny portable was selling so fast “it practically walks off the dealer’s counter.”

With the help of Bell Telephone Laboratories, RCA and General Electric patents, Japanese factories are turning out a rising tide of electronics goods for the home market as well as for export. This year Japanese consumers will spend $350 million for Japan-made radio and TV sets. Abroad, Japanese radios are being assembled in plants from the Philippines to Egypt. The U.S., which imported 2,300,000 Japanese radios last year, around a quarter of them for reexport, this year is buying at the annual rate of 3,600,000. Japanese manufacturers are not stopping with such consumer products. Three Japanese companies are rushing industrial computers to market, and some are even beginning to show an interest in bidding on U.S. defense contracts.

Earning a Dowry. The Japanese electronics industry’s most striking progress has been in the field of transistors. Output jumped from 11,600 in 1954 to 27 million last year, and this year it should pass 80 million, 70% more than the 1958

U.S. output. Whereas rival U.S. manufacturers deride Japanese transistors as “cheap and dirty” (i.e., adequate for consumer equipment but not precise enough for high-grade military or industrial use), U.S. engineers rank good Japanese transistors on a par with good U.S. transistors—and they are considerably cheaper.

Japan’s success is based mainly upon low wages and high skills. The typical Japanese transistor worker is a deft-fingered, teen-aged girl, accumulating a dowry and delighted to work for $23.34 a month and dormitory space. Furthermore, the Japanese have successfully overcome their greatest drawback, the tendency to export poor-quality goods. The government refuses to license substandard products. Individual Japanese companies are even more exacting. Hitachi, Ltd. of Tokyo, one of the leading makers, recalled an entire U.S. shipment because one plastic case color ran slightly.

Sharing the Business. Father of the Japanese industry is Masaru Ibuka. 51, a prewar movie sound technician who in 1948 set up what is now the Sony Corp. to make tape recorders and other sound equipment. Hearing of the development of transistors at Bell Telephone Laboratories, Ibuka produced laboratory samples, brought them to the U.S. to arrange the first Japanese transistor-patent licensing agreement. While many U.S. electronics men concentrated on industrial and military uses of transistors. Ibuka went after the consumer market, started the Japanese fad for miniature radios, eventually attracted some 100 competitors into the field.

Last week Japanese electronics leaders were sharply divided over how hard to push exports of finished consumer products. Ibuka, whose radio exports rose from 32,000 sets in January to 55,000 in March, intends to keep on exporting under his own label. To avoid arousing a protectionist outcry in the U.S., many Japanese manufacturers think a better way to keep on growing is to sell components to U.S. companies to assemble, thus dividing up the work and the profit.