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The Fall of A Giant: Toshiba Wraps up Its Laptop Business

Toshiba Malaysia HQ

One of Japan’s foremost electronics companies is struggling to stay alive. Toshiba failed to age gracefully in the global economy causing its demise. For decades Toshiba has been a household name for electronics and laptops. The recent shock came as the company decided to leave the laptop market. The report came that the company has sold its remain stake to the Sharp.

The company has been critically ill for a long time now and slowly, it’s fading off the market with no imminent signs of a turn about in its fortunes. With it are companies like Sony, Hitachi, Olympus, and other Japanese tech companies that look behind to their days of glory past as they think they might be the next to be in this condition. Neither the help from the Japanese government nor the help from friends in the industry is being able to put an end to the downfall of the company. And all these happened in just 10 years. In just a decade the company went from being a manufacturer of cutting edge technology to a manufacturer of mostly nothing.

Looking at the beginning:

Toshiba Corporation, the Japanese multinational conglomerate, was founded in 1939 as Tokyo Shibaura Denki K.K. (Tokyo Shibaura Electric Co., Ltd). The company formed as a merger between Tokyo Denki and Shibaura Seisaku-sho (You can name Toshiba if you merge the “To” of Tokyo Denki with “Shiba” of Shibaura Seisaku-sho.)

Shibaura Seisaku-sho was founded in 1875 and Tokyo Denki was founded in 1890. The company when first created by the merger was called Tokyo Shibaura Denki and finally changed its name to Toshiba Corporation in 1978.

Tanaka Seisakusho

It was the first company created by Tanaka Hisashige. Tanaka Hisashige was one of the most brilliant inventor engineers of his time. Founded in July 1875 the company became the first Japanese company to produce telegraph equipment and went on to produce switches and miscellaneous electrical communications equipment. The company was inherited by the founder’s adopted son and later became half of the present-day Toshiba company.

Shibaura Seisaku-sho

Logos of Shibaura Seisaku-sho (Shibaura Electronic Works) over the years. Photos by: logos.fandom.com
Logos of Shibaura Seisaku-sho (Shibaura Electronic Works) over the years. Photos by: logos.fandom.com

This was the new name of Tanaka Seisakusho after it reported insolvency in 1893 and got taken over by Mitsui Bank.

The company later in 1910 came into an agreement with General Electronics of the USA. In exchange for technology provided by GE, the company will be given a quarter of shares in the Shibaura. Like this GE also invested in Tokyo Denki. Both the companies merged in 1939 to form Tokyo Shibaura Denki (Tokyo Shibaura Electric Company, now Toshiba). Till the Second World War began, the agreement with GE remained intact. Although the relations became sour during the war, it was resumed in 1953 with General Electronics holding 24 percent shares in the company. Since then, it’s stake in the company has decreased largely.

Hakunetsusha (Tokyo Denki)

Tokyo Denki logo
Tokyo Denki logo

Two of Japan’s industrial pioneers, Shōichi Miyoshi and Fujioka Ichisuke, established the company during the 1890s. The company focused on selling light bulbs that were made using bamboo filaments. After the trade with the west began via unequal treaty, the company met with fierce competition from imports as its quality was poorer than that of the imports and it cost 60% more than that of superior quality imported bulbs. Although it survived the First Sino-Japanese War of 1894–95 and the Russo-Japanese War of 1904–05, the company’s economic condition fell to the ground.

In 1905 the company upon agreements with General Electric of USA renamed itself Tokyo Denki. The American company helped the Japanese both technologically and financially. In return for a 51% stake in the company, they provided with a vice president for the company and also the technology for superior bulb making. Under GE’s trademark, the company started to produce and sell its product.

In 1939 the company went into an agreement with Shibaura Seisakusho and both merged to create Tokyo Shibaura Denki (Tokyo Shibaura Electric Company, now Toshiba).

Logos of Tokyo Shibaura Denki over the years. Photos from:logos.fandom.com
Logos of Tokyo Shibaura Denki over the years. Photos from:logos.fandom.com

From bulbs to laptops:

Since its creation, the company has remained at the forefront of technology with innovations in many areas. In 1921 double coiled light bulbs were invented by Tokyo Electric. This feature can still be found in the most incandescent bulbs. With the production of videotape recorders, television sets, air conditioners, and even mechanized mail-processing equipment there is hardly anything in the industry that the company did not have their hands on. The company pushed the technology forward in all these quite remarkably.

Toshiba logo 1950-1984
Toshiba logo 1950-1984

Since its creation, the company has gotten off very rapidly by growing themselves and also taking in other companies. In the 1940s and 1950s, the company mainly focused on buying industrial and engineering firms. After the war, the company started to invest in many new modern technologies which brought forward the versatility of the company. In the 1960s the company added new groups like Toshiba Music. In the 1970s, they added Toshiba International Corporation. Then in 1974, they added Toshiba Electronic Equipments and Toshiba Chemical and in 1989 they added Toshiba Lighting and Technology Corporation.

In the 1980s and 1990s, the Japanese government provided cheap loans and subsidies to make the homegrown technology flourish and so that the Japanese companies could bring in profits. During this time Toshiba has gained prominence in the industry and saw the Sun, shine on their fortunes.

In 1985 the company produced T1100, the first mass-market laptop from the company. While there were other laptops in the market, the T1100 was the world’s first IBM compatible laptop. IBM compatible means that the laptop was constituted of the same elements as an IBM desktop computer would be. IBM then had been on the cutting edge of technology and the forefront of innovation in these departments.

Toshiba T1100 laptop
Toshiba T1100 laptop

The project was led by Atsutoshi Nishida. According to several reports, he only got the green flag to take the project forward after he promised that 10000 units of his products would be sold. This then was a large number for a new untested product in the market. When it was launched, selling 10,000 units was not a problem for the company. This paved the way for the first modern-day laptop and largely helped the company to become popular.

After a few years, the company made its mark by inventing another new technology. This time they created NAND flash drive. This is a key component of all modern hardware. They are an essential part of RAM and storage devices. This was the first memory chip that could retain memory without power. The creator of this was an engineer named Fujio Masuoka. Although he did not get many rewards for his creation, Toshiba made huge profits. The chip got used in digital cameras, mp3 players, smartphones, and USB flash drives. According to reports from T4, in 2019 Toshiba shared 18% of the NAND flash drive market. They were only second to Samsung, who had a market share of 35%.

NAND market share 2019 by T4.ai
NAND market share 2019 by T4.ai

During the 1990s and early 2000s, the company went on to become a major player in the laptop industry. According to reports, in 2007 the company was responsible for 17.8% of all computer sales in retail stores in the US. During this time the company also retained its lead in being the top company in the NAND flash drive market.

The growing competition and introduction of internet

The 2000s also saw the upcoming of the internet. During this time sales of computers, products saw a huge increase. Not only tech-savvy and technology experts in the field but also many ordinary people found interest in technology and started buying.

With this came the tide of competition. Many low-end companies like Acer and Asus got the opportunity to sell laptops and other electrical products. Soon came the Chinese brands with lower prices like Lenovo. This added to the competition.

Soon with the technology growing with every passing year, laptops were not in the cutting edge of things. They became similar to buying any other household electronic products. This made the customer’s head turn towards the cheapest brands that would offer all the required features. This pushed off brands like Toshiba out of frame.

2008 recession hit the company hard and later reports point out that the company shrank 80% from 2007 to 2015. In 2015 the company also started to outsource the manufacture of its TVs and the company was pulled out of non-Japanese markets. Toshiba televisions as reported would be manufactured by Compal for the U.S., or by Vestel and other manufacturers for the European market. The company dissolved an Egyptian production plant and sold off an Indonesian plant.

Annual revenue of Toshiba's PC division by theatlas.com
Annual revenue of Toshiba’s PC division by theatlas.com

A research firm IDC claimed that the company held 20% of the PC market in 1996 and in 2016 the market share came down to just 5%.

The accounting scandal:

In May 2015, Toshiba reported that they were investigating an accounting scandal. CEO Hisao Tanaka resigned from his office on 21st July 2015 saying the scandal event was “the most damaging event for our brand in the company’s 140-year history”. Eight other senior officials and two previous CEOs also resigned. Chairman Masashi Muromachi was appointed acting CEO.

A 334-page report was provided upon completion of the investigation. To please the shareholders, the CEO Atsutoshi Nishida (who built the T1100) fudged the account books. The targets that he set up were unrealistic and unimaginable. As he could not reach his target number this time, he started to cook the books and encouraged his subordinates to do the same.

Following the report, the company was removed from the Tokyo stock exchange’s list of companies that showed the best Japanese companies. In September of that year, their shares fell to the lowest point in the last 2 years and a half years. In October 2015, the company sold the image sensor business to Sony.

Though the scandal did not take the company out at once, it highlighted problems in the company. The subordinates were afraid to deliver bad news to their managers and this led them away from the innovative path in the time when they needed innovations most. The company went ahead to seek 300 billion yen ($2.5 billion) which took its debt to more than 1 trillion yen (about $8.3 billion).

In mid-2016 Toshiba faced another problem when it had to recall 100000 units of laptops that could overheat due to faulty batteries. The batteries were manufactured by Panasonic. In December of 2016, cannon acquired Toshiba Medical Systems Corporation. A Chinese corporation named Midea Group also bought an 80.1% stake in Toshiba Home Appliances Group.

Westinghouse bankruptcy and later problems:

Back in 2006, Toshiba bought Westinghouse, the US-based builder of nuclear facilities. The deal was signed for $ 5.4 billion. Though it was a new market that Toshiba invested in, the market was foreseen to grow for the next decade. In 2005, many countries started to invest and commit to nuclear power. The US went ahead and announced loan guarantees, production tax credits, and other incentives to lure in companies.

The tsunami of 2011 caused a disastrous meltdown of Japan’s Fukushima Daiichi plant. This put a stop in Japan’s investment in nuclear power as it closed all of its nuclear reactors. Soon other countries followed.

Chicago Bridge & Iron which was in contract with Westinghouse to build four of the nuclear reactors soon closed and sold itself to Westinghouse. This was due to the company having to escape from expensive and delayed projects. Westinghouse later found that the projects were a lot more expensive than they have imagined. This made debt pile up and later they filed for bankruptcy. In December 2016, the management of Toshiba called in an “urgent press briefing” to report their newfound losses in Westinghouse. This also took Toshiba to the brink of bankruptcy.

In January 2017, Toshiba thought to make the NAND flash memory chip division a separate company to save themselves from bankruptcy. In February that year, they reported a loss of 390 billion yen ($3.4 billion) mainly arising from its majority-owned US-based Westinghouse nuclear construction subsidiary which was written down by 712 billion yen ($6.3 billion). On 14th February 2017, the company delayed its financial report and the chairman of the company Shigenori Shiga (former chairman of Westinghouse) resigned from his post.

Installation of the containment vessel ring at Vogtle 4 (Image: Georgia Power)
Installation of the containment vessel ring at Vogtle 4 (Image: Georgia Power)

This was mainly caused due to construction delays and cost infestation in construction of Vogtle units 3 and 4 in Waynesboro, Georgia, and VC Summer units 2 and 3 in South Carolina nuclear plants. On March 29, 2017, Westinghouse filed for bankruptcy.

In June 2018, Sharp bought the company’s 80% majority stake in Client Solutions (PC) for $ 36 million. Later in 2019, it was named Dynabook, which looks forward to bring together Shap’s technology with Toshiba’s expertise.

In May 2019, Toshiba declared that for the first time in 80 years non-Japanese investors would be put on its board.

Wrapping up the laptop business

Toshiba although one of the first players of the game, has lost its relevancy in the past few decades. Toshiba had already started to outsource it’s laptop production in 2015 and also started to make new models in its china facilities.

With other brands taking innovation to another level and they having their internal problems lacked to acquire the concentration of the consumers. Facing tough competition from Apple’s MacBook Air and ThinkPads they started to fade away from the minds of its consumers. Rise of Dell, Lenovo, and HP made them just another brand.

This has lead to a question in front of most Japanese brands as what this means for them. A few years back Sharp was bought by Foxconn. In 2014, Sony had exited the PC business and since then Sony had also lost a major share in its smartphone market. Before Pokemon Go set the trend, Nintendo was also on the verge of disappearing. It is to see what happens to the Japanese brands in the coming years. Can they withstand the US innovation and Asian cheap manufacture? Only time will answer.

As of Toshiba is neither “In Touch With Tomorrow” nor is “leading innovation” as its slogans said in those days. But it is definite that they can “Feel The Power” of the current market competition. Coming years will question its relevancy and if it can still be “Committed to People, Committed to the Future”.

Toshiba logo "in touch with tomorrow"
Toshiba logo “in touch with tomorrow”

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