*NEWS*WHY TOSHIBA IS CLAMMING UP !

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*NEWS*WHY TOSHIBA IS CLAMMING UP !

 user 2005-12-15 at 1:20:00 pm Views: 87
  • #13827

    Why Toshiba Is Clamming Up
    Forget licensing — the electronics giant is keeping innovations out of rivals’ hands
    There’s
    an eerie silence these days in the elevators at Toshiba Corp.’s 
    36-story Tokyo headquarters. A sign pasted on the door of every car
    reads “Quiet Please,” and employees either whisper or hold their
    tongues as they shuttle between floors. Why the prohibition on chatter?
    Toshiba wants to make sure outsiders don’t overhear any secrets.
    It
    fits nicely with a campaign by new Chief Executive Atsutoshi Nishida to
    keep key technologies close to the vest. As a Toshiba executive for two
    decades, Nishida watched promising innovations become commodities as
    the company licensed newfangled memory chips, hard drives, and other
    ideas to rivals. Without a stable but low-growth business in power
    plants and infrastructure, Toshiba might have seen its last days. “Now
    is the time for us to think about our survival,” Nishida says.
    So
    six months after taking the helm at Toshiba, Nishida is hoping to end
    the vicious cycle of tech commoditization. His plan boils down to
    guarding the technologies that help the conglomerate distinguish its
    products from rival offerings. The strategy won’t apply to everything,
    but it will mean select innovations, such as next-generation memory
    chips, hard drives, and batteries that were developed in-house will
    stay in-house. And Toshiba has a message for anyone who dares piggyback
    on its patents without permission: See you in court.
    That thinking
    stands in stark contrast to the way the high-tech industry operates
    today. Most companies try to persuade others to adopt their
    technologies, then reap the benefits of their innovation through
    licensing fees. While Nishida is a believer in some open standards to
    help new products spread, the share-the-wealth model often drives
    margins down near zero — as hordes of low-cost manufacturers in China,
    Taiwan, and elsewhere jump in. Indeed, Toshiba has been a beneficiary
    of this system, earning decent royalties during the past decade from
    both its DVD and flash memory technologies. But those licensing deals
    haven’t ensured profitability: The peak years for royalty payments on
    DVDs have coincided with the company’s leanest period. So Nishida says
    Toshiba will now do better by keeping its smartest innovations to
    itself and charging more for its own products that include them.
    A
    few years ago, Toshiba was too preoccupied with getting its house in
    order even to consider such a strategy. It has missed its profit
    targets in four of the past five years, spurring layoffs of 20,000
    employees — 11% of its workforce. Today, though, brisk sales of
    semiconductors and electronics have Goldman Sachs Japan Ltd. ()
    forecasting profits for Toshiba of $762 million — 66% better than the
    company’s estimate — on sales of $51 billion. Next year, Goldman
    expects the company’s earnings to jump an additional 30%.
    A lot of
    Toshiba’s innovations will be largely invisible to consumers. Its
    research engineers, for instance, are working on smaller, denser, and
    less power-hungry flash memory chips that are expected to hit the
    market next year. In the past, Toshiba would have sold that technology
    to other chipmakers. But this time, says Nishida, Toshiba will make the
    new chips by itself — although they’ll probably end up in devices made
    by other companies. Similarly, Nishida says Toshiba will be the sole
    manufacturer of hard drives with a technology that can boost capacity
    by up to a third, and of a new type of battery for gas-electric hybrid
    cars that can be recharged in just a minute or so.
    LEGAL ACTION
    Other
    Toshiba innovations will be immediately recognizable. In 2007 the
    company expects to market Toshiba-branded cell phones, music players,
    and other gadgets powered by refillable fuel cells that convert liquid
    methanol into electricity. Also in 2007 — just in time for the Beijing
    Olympics — Toshiba hopes to open a $1.8 billion factory making
    high-definition flat-screen TVs using a technology it developed in
    conjunction with Canon Inc. () that uses less power and delivers a
    sharper picture.
    Toshiba is backing its strategy with action. On
    Sept. 29 it took a long-simmering dispute with Korea’s Hynix
    Semiconductor Inc. to the U.S. International Trade Commission in
    Washington. Toshiba says Hynix owes it hefty royalty payments for flash
    memory chips, which Toshiba invented — but Hynix says Toshiba actually
    owes it money. One big reason for the stepped-up action: The chips are
    the semiconductor industry’s fastest-growing sector. Toshiba is laying
    out $1.9 billion this year to triple flash output by next March, and it
    doesn’t want others to benefit from its research. “Toshiba will
    increasingly sue rivals in patent rights cases that can’t be settled
    with negotiations,” says Taisuke Kato, who heads Toshiba’s
    intellectual-property division.
    It’s a hardball strategy for a
    company that has been lax for years about its most valuable assets. And
    it could well be effective even when secrets are picked up in elevators.