The mighty, fallen

JAPAN'S electronics companies once epitomised its national power and defined late-20th-century consumer technology. Sony introduced the transistor radio and the Walkman. Toshiba was first to mass-produce laptops. Sharp—which got its name from inventing the mechanical pencil in 1915—pioneered solar cells and LCD screens. The companies earned their fortunes from running efficient operations at home that shipped in huge quantities to the West.

But the world changed and Japanese technology firms did not keep up. They kept too many low-value activities in high-cost Japan for too long. They focused on satisfying domestic consumers with advanced features that didn't matter to customers elsewhere. And they were tardy in entering emerging markets. Over the past decade NEC and Hitachi posted returns on assets of around 2%. In an extraordinary reversal, last year Japan became a net importer of televisions and stereos (albeit often with a Japanese brand on the casing).