INTRO: Remember Toshiba?
In the 2000s, they were one of the most popular laptop brands in the world.
In 2007, they controlled 7.3% of the global laptop market which is more than Apple’s
laptop market share in 2018.
Aside from dominating the laptop space, Toshiba was a massive player within the hard drive/memory
space and consumer electronics.
And let’s not forget their famous Times Square advertisement.
But, over the past 10 years, they’ve fallen off a cliff.
Their revenues have halved, their net income has stabilized at marginal numbers, they sold
off a lot of their business, they were caught for accounting fraud, they shut down their
laptop business, one of their subsidiaries filed for bankruptcy, and they have overall
just been struggling to stay afloat.
Somehow, within just 15 years, Toshiba went from being a highly respected Japanese electronics
company to mostly being forgotten about.
So, here’s how Toshiba got so large in the first place, where did went wrong, and why
this may be the end of Toshiba.
PRE TOSHIBA: Unlike most tech companies today, Toshiba
wasn’t founded within the past few decades or even the past hundred years.
Toshiba was actually founded way back on July 11, 1875.
A few years before the company was founded, the ministry of engineering commissioned a
Japanese engineer named Tanaka Hisashige to develop telegraphic equipment.
At the time, the phone was yet to be invented, but telegraphs had been around for nearly
40 years.
However, Japan had yet to really embrace the technology, so this commission was basically
a part of the country’s modernization effort.
Anyway, along the development process, Tanaka established the company Tanaka Seisakusho
which means Tanaka Engineering Works and this is what would eventually become Toshiba.
Initially, the company was just selling telegraph equipment, electric switches, and various
communications equipment.
After Tanaka passed away in 1881, his son took over the company and sold a part of the
company to General Electric.
This allowed them to expand into the production of torpedoes and mines which was wanted by
the Japanese Navy.
However, once the navy figured out how to produce their own weapons, they ditched Tanaka
Engineering which drove the company to insolvency.
By 1893, the company ran out of money, and Mitsui bank took over the company and renamed
it Shibaura Engineering Works.
Over the next several years, they developed some utilitarian products such as a waterwheel-powered
turbine generator and a radio transmitter.
But, none of these really caught steam and made the company that much money.
So, in 1910, the company formed another deal with GE.
GE agreed to share its technology with Shibaura in exchange for a quarter of the company.
After this deal, Shibaura finally started to make some progress within heavy electrical
machinery, but then they got beat down quite hard.
In 1923, Japan experienced the Great Kanto Earthquake which claimed the lives of 100,000
people, many of which were Shibaura employees.
And just as Shibaura finished reconstruction, the Japanese government banned the production
of home appliances in order to conserve materials for World War 2.
To make things worse, the US and Japan weren’t exactly friends throughout the war, so the
partnership with GE was iffy to say the least.
So, in 1939, Shibaura decided to merge with another GE-powered Japanese company called
Tokyo Denki, and together they formed Tokyo Shibaura Denki.
Unlike Shibaura who focused on heavy machinery and appliances, Tokyo Denki was mainly focused
on small consumer electronics.
Throughout the rest of the war, the duo tried to supply the military with radios, vacuum
tubes, and generators, but this led to their factories being constantly bombed.
Nonetheless, these government contracts left them much better off than most engineering
companies which got decimated during the war.
And through the 1940s and 50s, these guys picked up all of the devastated engineering
companies and formed a super conglomerate.
And while these guys were struggling on their own, together, they were about to become an
unstoppable force.
TOSHIBA’S HAYDAY: Over the next few decades, Tokyo Shibaura
churned out product after product.
First, they had the TAC Digital Computer in 1954, then there was the transistor TV and
the microwave oven in 1959, and finally, there was the color video phone, the MRI system,
and the laptop throughout the 70s and 80s.
Aside from launching a slew of products, Toshiba also launched a slew of companies including
Toshiba Music, Toshiba Chemical, Toshiba Lighting and Technology, and Toshiba America Information
Systems.
When many of these subsidiaries were formed though, the company wasn’t actually called
Toshiba.
It was still called Tokyo Shibaura Denki, and it wasn’t till 1984 that they combined
the words Tokyo and Shibaura to create Toshiba and made it the company’s official name.
It wasn’t all smooth sailing though.
In 1987, one of Toshiba’s subsidiaries, Tocibai, Machine, was caught selling submarine
propeller production equipment to the Soviet Union.
And this was in violation of the CoCom agreement which established an embargo on certain countries.
This incident hurt Japanese American relations and resulted in the prosecution of two senior
executives.
But, despite this setback, Toshiba continued to march forward into the new century.
In 2001, Toshiba formed a partnership with Orion Electric who was one of the world’s
largest OEM manufacturers.
Orion helped Toshiba bring TVs and other video-related products to the North American market.
This partnership was going well enough that Toshiba actually stopped in-house CRT television
production in 2004.
Shortly after, they also shut down in-house plasma television production.
But this partnership didn’t last forever.
The contract only specified a 7-year partnership and the two companies went their separate
ways in 2008.
Unfortunately, this was basically the peak of Toshiba’s business, but they didn’t
know it at the time.
Toshiba was actually celebrating their success and they bought the famous Time Square display
from Discover Card in 2007.
For the next 11 years, Toshiba displayed the countdown every New Year, but really, they
were just counting down to their own demise.
A NUCLEAR DISASTER: Probably one of Toshiba’s biggest blunders
was investing heavily in nuclear energy.
Toshiba had a presence within nuclear energy production since 1970, but their biggest bet
didn’t come till 2006.
Toshiba spent $5.4 billion to acquire a majority stake in the nuclear power plant company Westinghouse
Electric.
At the time, this was seen as an extremely desirable acquisition.
It was clear that coal and oil weren’t good long-term energy solutions.
Meanwhile, renewable sources like hydropower and solar couldn’t produce nearly enough
energy.
So, it seemed like safe nuclear power production was the future.
Toshiba actually bid 3 times more than what analysts thought Westinghouse was worth to
acquire their stake, and after the acquisition, Toshiba’s CEO Atsutoshi Nishida proudly
announced that nuclear power was going to grow 50% by 2020.
But, in reality, Nuclear power production hasn’t really grown since 2000.
Aside from the market itself not really growing, Toshiba also experienced some bad luck.
In 2011, an earthquake/tsunami disabled the power supply and cooling of three Fukushima
Daiichi reactors.
This led to all three cores melting within the next few days and causing a nuclear accident.
This was the last thing Japan wanted to happen.
19,500 people had died due to the earthquake and tsunami.
And now, they had to evacuate 100,000 people to minimize radiation.
As you would guess, Japan was done with nuclear energy after this incident.
They stopped investments into the industry and shut down all nuclear reactors which led
to many countries following suit.
Despite all this, Toshiba’s CEO at the time, Norio Sasaki, assured investors that nuclear
energy would continue to be a strong option moving forward.
But, he wouldn’t be able to keep up this charade for much longer.
One of Westinghouse’s biggest customers Chicago Bridge & Iron Company closed its nuclear
division.
In an effort to keep the contracts alive, Westinghouse bought their nuclear division,
but it quickly became clear that these contracts could not be completed profitably.
At one point, it became so bad that keeping the nuclear division open would bankrupt Toshiba
itself.
So, in March of 2017, Toshiba let Westinghouse file for bankruptcy.
And that was basically the end of Toshiba’s nuclear business.
CORE DECLINE: Toshiba may have lost big on their nuclear
bet, but they still had their core electronics business right?
Well, not really.
You see, Toshiba had spent so much capital and effort in the nuclear business that they
let their core business slip away from them.
Throughout the late 2000s and early 2010s, we witnessed the mobile revolution which Toshiba
completely missed out on.
And as for their laptop business, consumers were slowly forgetting about Toshiba.
Here’s the thing, most people never bought Toshiba laptops because they loved Toshiba.
Most people just bought Toshiba laptops cause they were practical, affordable, and durable.
In other words, Toshiba didn’t have much brand loyalty and the laptop industry was
becoming increasingly unprofitable.
Survivors like Dell and HP completely altered their strategy.
They more or less accepted 0% net margins on their consumer hardware and focused on
trying to make money through alternative methods.
Toshiba, however, didn’t get the memo and they got squeezed as laptop profit margins
trended towards 0.
They held on as long as they could, but in August of 2020, they announced that they would
exit the laptop industry after 35 years.
In the meantime, their television business wasn’t fairing too well either.
In the early 2010s, Toshiba had fully embraced 3D televisions which were super hot at the
time.
But, it didn’t take long for consumers to write it off as a gimmick and move back to
regular TVs.
Around the same time, Toshiba also lost the war against Blu-ray.
Toshiba was the principal supporter of the HD DVD format, but as studios increasingly
supported Blu-ray, Toshiba had no choice but to give in.
Honestly though, given that DVDs themselves are becoming obsolete, the loss of this business
was inevitable even if they had won against Blu-ray.
With Toshiba’s laptop business gone, and their TV business on a massive decline, Toshiba
only had a few things left to hold onto.
TOSHIBA TODAY: Today, Toshiba is no doubt just a shell of
their former self.
Currently, they’re staying afloat through two main sectors which include the memory
business and the industrial equipment business.
Toshiba was actually the pioneer of flash memory back in the 1980s, but they’ve lost
significant market share to Samsung over the past decade.
To make things even worse, Toshiba sold their flash memory unit to save the rest of their
business in 2018.
They did get a solid $18 billion from the sale, but honestly, I think they gave up their
last source of hope with this sale.
After all, the entire company of Toshiba itself is only worth $19 billion now.
Considering all these hardships, I don’t think you’d be too surprised to hear that
Toshiba’s executives resorted to faking their numbers.
In the years leading up to 2015, Toshiba had overstated their operating profits by $1.2
billion.
As you would guess, this was followed up with the CEO resigning and investor trust being
crushed.
Looking forward, Toshiba doesn’t really have much going for them.
The majority of their business is just selling industrial electronics, but it doesn’t seem
like Toshiba is innovating much there either.
So, it may just be a matter of time until a competitor overtakes this industry either.
Hopefully, Toshiba gets their act together given that they still employ 117,300 people,
but Toshiba can’t be propped up forever just to maintain the jobs.
Moreover, Toshiba has already reduced their workforce by 100,000 people over the past
decade.
So, if worse comes to worst, it won't be long till the remaining 100,000 are forced to look
for new employment as well.
But that’s just what I think.
Did you guys ever have a Toshiba laptop?
Comment that down below.
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