Your fridge just texted: Japan electronics firms pin hopes on ‘smart’ appliances

Your fridge just texted: Japan electronics firms pin hopes on ‘smart’ appliances

4:41pm EST

By Maki Shiraki and Sophie Knight

TOKYO (Reuters) – For Japan’s electronics firms, the kitchen is the final frontier. Companies from Panasonic Corp to Toshiba Corp are diverting engineers and money away from their TV operations and into developing ‘smart appliances’ after losing out in the living room to cheaper Asian rivals. A fridge that texts pictures to show what’s for dinner, a voice-controlled washing machine – appliances like these are being designed to talk to each other via the cloud to cut energy bills.For now, they’re expensive, deterring buyers: a Japan-only Toshiba smart fridge with camera runs to about $2,800 versus less than $800 for a basic model. Yet as more products come on the market and competition cuts prices, global smart appliance sales will rocket to $35 billion by 2020 from just over $600 million last year, according to technology intelligence firm Pike Research.

As the industry prepares to descend on Las Vegas next month for CES, the world’s biggest tech trade fair, that’s mouth-watering for all electronics makers. But none more than Japan’s.

They’ve been squeezed into billions of dollars of losses in recent years, caught between high manufacturing costs, aggressive competition from the likes of Samsung Electronics Co and the strong yen, making exports of consumer staples like TVs more expensive.

To prosper in the new niche, Japanese companies must not only convince consumers to shell out for a whole new set of appliances, which need to be all from the same brand to guarantee compatibility. Further down the line, they’ll also have to hold their own against the same cheaper Asian rivals that stole their thunder in leisure electronics.

“Everyone says having the same brand of goods would be more energy-efficient, but in the end it comes down to the price and function of each product,” said Satomi Wakamatsu, a 41-year old housewife from Hiroshima. She owns a Hitachi Ltd fridge and washing machine, and an air conditioner made by Daikin Industries Ltd.

Wakamatsu considered buying smart appliances. But she balked when she added up the cost of all-new appliances, in addition to the home energy management system (HEMS) needed to connect them to each other to monitor and cut energy usage – a further $2,000-$3,000.

Sales of Japanese companies’ HEMS were helped over the last year by hefty government subsidies designed to stimulate energy efficiency – but they ended in October. Panasonic sold 20,000 HEMS units between April and September, double its full-year target, but said it’s unsure if that pace can be sustained without the subsidy.

Toshiba, meanwhile, wants 20 percent of its appliance sales to be from ‘smart’ goods by the end of fiscal 2014.


The potential growth of smart goods sales has also stimulated peers in the United States and Europe, including Whirlpool Corp, General Electric Co, Electrolux AB, Robert Bosch GmbH, and Indesit Company SpA.

In Asia, South Korea’s Samsung Electronics and LG Electronics Inc have rolled out smart appliances and have plans to go further afield: Samsung recently showed off its line at luxury department store Harrods in London, including a fridge fitted with an LCD panel to keep track of groceries and suggest recipes.

“If you see the recent trends in the appliances market, made-in-Japan products are increasingly threatened by their Korean and Chinese counterparts with enhanced technologies and competitive prices,” said Jamie Ko, head of consumer appliances at research firm Euromonitor.

As sales of digital audiovisual gadgets have waned over recent years, many Japanese firms already make more money from traditional household appliances, mostly sold in Japan, than from consumer electronics sold globally.

For instance, Panasonic lost 16.5 billion yen ($160 million)on its audio and TV unit in the six months to September 30, when its appliances pulled in 17.2 billion yen, about 12 percent of its total operating profit.

But the basic cost of the smart appliances and the hubs that service them remain beyond basic consumers’ budgets and exceeds the likely medium-term energy savings. At this stage in their development, the devices will only cut electricity bills by around 10 percent, according to Toshiba and Panasonic.

Japanese consumers’ eagerness to go green may also have waned since the aftermath of March 11, 2011, when a massive earthquake triggered a nuclear plant meltdown and spurred debate on energy supply and saving.

“Two years ago I thought sales of smart appliances sales would accelerate as (saving) energy had become a hot topic, but I think the rush in Japan has slowed somewhat,” said Masami Yamamoto, the president of Fujitsu Ltd, which supplies cloud computing services for the systems needed to run the appliances.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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