Japan's echo of `His Master's Voice' still true to consumer electronics

The Japan Victor Company (JVC) has all sorts of ideas, as any visitor to its laboratory can plainly see. But the super-realistic audio systems, newfangled video devices, and other gee-whiz gizmos cluttering this consumer products development center just help underscore one unanswered question: What do you do with all this stuff? ``That,'' says Toshiya Inoue, JVC's director of research and development, ``is our homework.''

It is also a riddle stumping the consumer electronics industry here as its 30-year heyday comes to an end. Engineers like Mr. Inoue are trying to develop a product that will capture the public's imagination and pocketbooks the way the videotape recorder has. But it isn't easy, and few industry executives seem willing to wait for the next innovation that will reinvigorate the market.

Instead, they are leading their company's charge into office equipment, semiconductors, telecommunications, and computers. Next to these fields, consumer electronics, once the brightest star in the high-tech firmament, is looking pale.

``We have to keep up to date,'' says Akira Maeda, director of Matsushita Electric Industrial Company. ``We're entering a new era of communications. You can't just go on making pocket radios.''

The videocassette recorder (VCR) is hardly past its prime. In 1984 it accounted for more than 40 percent of the $19.4 billion Japanese audio and video production run. But until this year, the VCR market had ballooned by as much as 50 percent annually. Now, as some key markets approach saturation, it is expanding at a less vigorous 20 percent.

And most industry observers doubt that any products now on the market will carry the day the way the VCR did. Demand for color televisions, the industry mainstay, is relatively flat. The new compact disc systems, audio devices that boast extraordinarily clear sound, have been providing the market with a boost. But analysts say that many of them will end up replacing phonograph turntables, which they have rendered obsolete, rather than helping to expand the market.

The industry as a whole, which began its boom in 1955 with Sony's transistor radio and enjoyed 20-percent-a-year growth during the '60s and '70s, can only expect 4 to 5 percent expansion from here on.

``The VCR was the last of the consumer boom products,'' says Darrell Whitten, an analyst following the consumer electronics industry for Prudential-Bache Securities in Tokyo. ``If the companies want to grow, they have to diversify.''

Many are taking to that advice with gusto. Sony chairman Akio Morita hails 1985 as ``the year of the compact disc.'' But his company aims to increase its share of sales of nonconsumer products to 50 percent by 1990, as opposed to the current 20 percent.

Where once they only sold finished products with the Sony label attached, now they eagerly tout the components -- semiconductor chips and videos tubes -- that are sold to other companies, which turn around and pass them off as their own. They have also embarked on strategies to inch their way into the communications and personal computer market.

In fact, Sony shies away from calling itself a ``consumer electronics company,'' preferring ``electronic products and communications'' company.

Ditto for Matsushita, the world's largest consumer electronics company, which sells under the brand names of Panasonic, National, Quasar, and Technics and which owns 50.2 percent of JVC. Matsushita has plans to diversify its lineup by 1986, and company executives are quick to correct visitors calling Matsushita a ``consumer electronics company.''

The company is spending heavily on semiconductor research. It is also a charter member of the fifth-generation computer project, a government-industry collaboration that aims to develop computers endowed with the ability to reason. It also intends to play a role in Japan's newly deregulated telecommunications market.

Audiomakers such as Teac, Akai, and Sansui are joining the fray as well. Since theirs is the slowest-growing market, they are rushing into the floppy-disk-drive business. Amid all this, the most tradition-bound firm appears to be JVC, which insists on classifying itself a ``consumer electronics company'' -- accurate, considering only 7 percent of its business last year came from nonconsumer products.

JVC developed Japan's first television set in 1939 and, in 1976, the VHS-format videocassette recorder that eventually swept past Sony's Betamax to capture the dominant share of the world market. The Japanese descendant of the American Victor Talking Machine Company, JVC remains fiercely loyal to its roots.

``We are a consumer electronics company, and we will remain one,'' says JVC president Ichiro Shinji.

JVC has high hopes for its videodisc. Like videocassette recorders, it can play recorded movies and television shows. Yet it can also be used to store enormous amounts of information for quick access. JVC officials envision videodiscs not only for home entertainment but for shopping catalogs, computer video games, computer data storage, and even avant-garde video art.

Digital television and audio devices under development will also form an indispensable part of so-called ``new media'' devices that integrate computing capabilities with electronic information services.

At the same time, Shizuo Takano, head of JVC's video research and development efforts (and known around the company as ``Mr. VCR'' for his pioneering work on the device), stoutly defends the future of the VCR, saying its full range has yet to be exploited.

Even JVC has its own modest diversification plans. The company reluctantly concedes it would like to expand its share of nonconsumer business to 15 percent over the next few years. Although JVC has so far shied away from entering the personal computer market, it is beginning to apply its knowledge of microelectronics and magnetic technology, honed through the VCR experience, to the computer peripherals market. This month JVC introduced the world's smallest hard-disk computer memory system.

Still, that is the extent of radical departures for JVC. Company officials like to assert that drastic change isn't necessary, anyway: They expect the line between consumer and nonconsumer electronics to become increasingly irrelevant as home equipment becomes ever more sophisticated. Officials at NEC, which derives less than 7 percent of its sales income from the consumer market, agree. Ryo Watanabe, NEC consumer electronics vice-president, says, ``The distinctions are becoming academic.''