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Trade war

Panasonic director exhorts Chinese to shift on IP violation risk

Country risks falling victim to similar infringements, cautions founder's grandson

Masayuki Matsushita, vice chairman of Panasonic, speaks with the Nikkei Asian Review on Jan. 9 at the company's headquarters in Osaka. (Photo by Atsushi Ooka)

OSAKA -- The vice chairman of Panasonic, one of China's oldest industrial allies, has hit out at violations of intellectual property rights in the country, and cautioned that it too could soon become a victim of such infringements.

There have been cases in China where technology transfers "were not really done under ordinary methods," said Masayuki Matsushita, who has built up ties with the Chinese manufacturing industry over four decades.

"As China gradually accumulates intellectual property rights of its own and starts selling them abroad," he said in a rare interview with the Nikkei Asian Review, "they will understand the pain of having them stolen." Although he did not offer a quick fix for the situation.

Panasonic is feeling pressure from emerging Chinese competitors, and the company is losing the dominant status it established as one of the first global brands to enter the country. 

"It is difficult for [foreign companies like] us to claw back high market shares when the government favors state-owned enterprises and local companies," he said. Panasonic refrigerators now only have a roughly 5% share of the market, while its air conditioners only have about 2%. 

The ongoing conflict between the U.S. and China poses a critical risk to the Japanese electronics major, as it is preparing to intensify its focus on both markets, and Matsushita emphasized the importance of free trade to the conglomerate.

"There is no doubt that free trade brings wealth to people around the world and eventually leads to global peace," he said, as representatives from the U.S. and China squared off in Beijing. 

The timing of the ongoing tensions could hardly be worse for Panasonic. In fiscal 2017, ended March 2018, the company made 53% of its 8 trillion yen ($74 billion) revenue overseas, with over half, $12 billion, coming from the Americas and $9.1 billion coming from China. It also plans to set up in-house companies in both markets this April.

Panasonic is regarded as having made significant long-term contributions to the country, and Matsushita is better placed than most to offer an insight into the Chinese perspective. "In the course of history, there were conflicts between the haves and the have-nots of technology," he said.

The grandson of company founder Konosuke Matsushita has spent a sizable part of his career in China, and seen it change from an economic backwater to an economic behemoth. Last month, he was invited to a ceremony at the Great Hall of the People in Beijing, at which his grandfather was one of just 10 foreigners honored for outstanding contributions to the country's reform and opening-up efforts initiated 40 years ago.

He also studied at the University of Pennsylvania's Wharton School and served two stints at the company's U.S. subsidiary. He has long acted as the company's bridge to the world.

Matsushita first visited Beijing in 1980, accompanying his grandfather on his second trip, which paved the way for exports, technology transfers and direct investments in the country in the following decades.

It was "an amazing place," where the few cars on the road from the airport had to weave past bicycles and ox carts, he recalled. At the time, he could never have imagined the company setting up a cathode ray tube factory along the same road just nine years later. "Helping China develop is great, but I knew it would be a difficult undertaking."

Matsushita, the only member of the founding family on the company's board, has made over 50 trips to the country, including one as head of Panasonic's washing machine business in the early 80s to grant technical assistance to a state-owned factory in Yingkou in the northern province of Liaoning. 

More symbolic was when four of the company's factories were attacked by mobs in response to Japan's nationalization of the Senkaku Islands in 2012. China claims sovereignty over the islands in the East China Sea and calls them the Diaoyu Islands.

Masayuki Matsushita, then 38 and managing the washing machine business, explains a product to the founder and his then 89-year old grandfather Konosuke Matsushita at an exhibit in Kyoto on Feb. 2, 1984. (Photo provided by Panasonic)

The event came as a shock to many in Japan, given Panasonic's relationship with China. "The Chinese leaders are well aware of that," said Matsushita. "It is disappointing, but that knowledge was not widely held by the general public."

The vice chairman said the company now plans to tackle the Chinese market with a return to the basics of localization. "There shouldn't be any problem at all if we sell products that we develop within the country," he said.

"China is a market big enough to stand on its own," he added in reference to the trade war. "We have to make what fits local people's lifestyles."

That may be easier said than done. The mounting competition is even cutting into areas with high technology content, such as electric vehicle batteries.

UBS analyst Kenji Yasui said the investment community is "largely skeptical on whether Panasonic can compete with Chinese and South Korean rivals and reap substantial profitability from global customers."

He even raised the possibility of Midea Group, Haier and other Chinese companies launching an offensive in the Japanese home appliance market. Yasui cut his target stock price by 16% to 1,100 yen at the end of November, but the actual price sank to 1,042.5 yen as of Jan. 15. 

On Dec. 7, Credit Suisse Securities dropped Panasonic from its Japan focus list of 14 shares that they recommend and added its archrival Sony. Even though the securities firm maintained an "outperform" rating for the company, it has downgraded its order of preference in the sector due to lack of near team catalysts and likely stagnation in operating profit growth in the year to come.

Having seen his grandfather honored by the Chinese authorities as a "harbinger of an internationally recognized company committing to our reform and opening up," Matsushita feels Panasonic "is once again being cherished in China."

"We need to keep on working hard to meet the expectations of the Chinese," he said.

Nikkei staff writers Shizuka Tanabe and Yohei Kawai contributed to this report.

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