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Special Report: The Japanese Audio Industry

Special Report: The Japanese Audio Industry

Something is definitely afoot in the Japanese audio industry. For a country whose culture encourages cautious evolution, there have been a whole lot of big changes in a short time. The first was in 2011, when Sony, that quintessential mass-market brand, released the SS-AR1 speaker. At $27,000, this product was decidedly not intended for the masses. Shortly thereafter Panasonic, another company traditionally focused on the heart of consumer electronics, revived its premium Technics line, which had been dormant since 2000. Its inaugural offering was the $53,000 R1 Reference Series, pointedly launched in the hallowed high-end halls of the Venetian during CES.

These unexpected moves represented a dramatic increase in interest and investment in the high end from two of Japan’s largest corporations. In the same timeframe, additional investment was coming from outside the country. In 2013, for instance, guitar giant Gibson purchased TEAC along with its Esoteric subsidiary.

Another area where Japan’s audio landscape has changed is market positioning. Recently, all three of Japan’s high-end stalwarts—Esoteric, Accuphase, and Luxman—introduced lower-priced models. Esoteric simultaneously pushed further upmarket with its cost-no-object Grandioso series. In another context, these expansions would be business as usual. But when the companies involved have spent literally decades cultivating a much narrower market niche, such changes take on greater significance.

Perhaps the industry’s most intriguing tack lies deep within the new components themselves: a focus on technical innovation. Consider the aforementioned Technics R1 Reference series, which deploys a bevy of technical advances to grapple with some of audio’s most entrenched challenges. In an industry that built its reputation on traditional design and quality production, placing such a high priority on technology represents a seismic shift.

I’ve been wondering for some time what’s behind these developments, and I knew that the only way to find out for sure was to visit Japan. Besides understanding why large companies were suddenly so interested in the high end, why established players were breaking out of their comfort zones, and why innovation had become not only permissible but encouraged, I hoped to learn whether there was some overarching technical or sonic philosophy that translates to a Japanese “sound.”

To cover all that ground, I’d clearly need considerable in-country support. So I began looking for a host company willing to guide me through Japan’s labyrinthine corporate structures (and city streets), arrange meetings, and handle other logistics. To my delight, not one but two firms, Technics and Esoteric, stepped up to support this project. As a bonus, both companies have spearheaded the changes I’d observed, making them valuable information sources. I can’t thank Technics and Esoteric enough for offering their time, people, facilities, and knowledge. Everyone I met was genuinely intent on helping me get the answers I sought. You can’t ask for more than that.

And so my Japanese audio odyssey began. I allotted one week, which wasn’t enough time, but was the most I could spare. Still, with the help of my hosts, I packed in visits to corporate HQs, factories large and small, a museum dedicated to audio, several elaborate listening rooms, a “dojo” (training center), and a Tokyo high-end dealer. I met with founders, executives, designers, storeowners, importers, trainers, and factory supervisors. Going into the trip, I thought the answers to my questions would come quickly and easily. As it turned out, I needed every one of those site visits and meetings to fully grasp the remarkable complexities of the Japanese audio industry.

 

East Meets West
My first meeting was a breakfast interview with Sheen Uchida, President of Taiyo International. Uchida-san, who prefers the less formal Sheen, is a Japanese native educated in the U.S. He left Japan’s steel-import business 30 years ago, switching to audio. “I wanted to open the country’s eyes to other sonic possibilities,” Sheen told me. By “other possibilities” he was referring to famous U.S. and English audio brands that, at that time, were rare imports.

Sheen was the ideal person to explain to me how the highly nationalistic Japanese market views Western brands. He related that, due to high safety regulations and other barriers, imports have always been at a price disadvantage compared to domestics. Yet whereas Japanese products typically represent a team effort among designers, imports tend to reflect a single vision. This, he said, leads to Japanese components that are “sonically well-rounded but less distinctive” than their Western counterparts. By the mid-90s, those more-distinctive imports had caught on. Sheen’s business boomed. Today, his roster includes dCS, Jeff Rowland, Avalon Acoustics, and Rockport.

I asked Sheen why, given that the West’s individualistic design philosophy had proven appealing to at least a portion of the Japanese market, more Japanese firms didn’t simply emulate it. He told me that the answer lies in Japan’s tradition of providing lifetime employment. In that situation, he explained, employees are always aware that they may be working with their present colleagues for a very long time. Thus, every incentive is toward group cooperation rather than making waves with a contrary position. That doesn’t mean that Japanese audio companies don’t take design risks; rather, it means that individuals rarely take such risks. Instead, by working as a team, any risks are shared.


However, according to Sheen, this situation is changing. Japan’s economy has been riven by a decades-long recession. “The social safety net is dwindling,” he told me. As part of that trend, lifetime employment is no longer guaranteed.

One result is a populace that’s increasingly anxious about its retirement years and that has become more intent on saving than spending. This, in turn, has led to a backlash against what many perceive as the “outrageous” prices of many high-end brands. Of course, similar economic anxiety is occurring around the globe, which explains why Japanese brands like Accuphase, Luxman, and Esoteric, which depend on both the domestic and export markets, have felt compelled to introduce more affordable products. The need for more value-oriented offerings is also why Sheen’s Taiyo International has started importing the German T+A line.

My talk with Sheen ended there, but his observations reverberated throughout my trip. In particular, I would learn later on that the waning of lifetime employment has had much more profound—and, ironically, beneficial—implications for the Japanese audio industry.

 

Old School vs. New School
My next stop was Lyra, a renowned Japanese cartridge manufacturer whose products are familiar to TAS readers. The company was founded and is run by Stig Bjorge, Managing Director and CEO, and Jonathan Carr, who heads design and engineering. Stig, who started his Japanese career by launching Ortofon Japan, kicked off our meeting by relating a tale that exemplifies the country’s conservative culture. When Lyra entered the cartridge market as Scan-Tech in 1986 (the Lyra brand was launched in 1991), it understood that, as a newcomer, it had to honor and respect entrenched players. Lyra demonstrated this respect by treating the latter as “sensei,” which roughly translates to mentors. Lyra also took pains not to copy or overlap established products or designs. This last tactic wasn’t difficult, because Jonathan had a new and rather radical cartridge design in mind.

Initially, Lyra sought to cement long-term camaraderie by outsourcing the manufacture of its new cartridge to Supex. But that plan soon ran aground. Supex viewed Jonathan’s designs with wariness. As Jonathan explained to me, echoing some of Sheen’s themes, “the Japanese are meticulous, precise, and group-oriented. The result is very careful execution of not-so-radical themes.” Supex wasn’t game, but they didn’t flat-out turn Jonathan down. That would’ve run counter to the Japanese business culture, which strives to accommodate every customer and partner request. Instead, Supex opined that Jonathan’s ideas would be “difficult” to implement. That meant “no.” Thus, Lyra had no choice but to take manufacturing in-house.

Much of that work was—and still is—carried out by IT Industry. The small manufacturing firm, tucked away on a residential street just outside downtown Tokyo, fabricates Lyra parts and bodies, and does some sub-assembly. As I entered the plant’s unassuming door, I expected an ultra-modern manufacturing facility. Instead, what I encountered was decidedly old-school. Most of the work at IT Industry is done by hand, with machines in a supporting role. Workers, many of them obviously employees of long standing, clearly consider themselves craftsmen.


The concept of cartridge building as craft is taken to the extreme in Lyra’s final assembly process. As with other Japanese crafts, from sushi preparation to bonsai pruning to tea ceremonies, Lyra’s final assembly is meticulous and personal. The work is carried out by a single man, the nearly mystical Yoshinori Mishima. Mishima-san adjusts and voices every single cartridge Lyra builds. If he gets a cold, production halts for a week to ten days. That’s a price Lyra is happy to pay for the results it attains.

Over a post-tour lunch with Stig and Jonathan, the conversation veered once again to Japan’s relationship with the West. Stig explained that the country’s defeat in World War II was followed by a national adulation of all things American. Combine that with a reverence for long-lived brands, and it’s easy to understand the popularity in Japan of iconic American companies like McIntosh, Western Electric, JBL, and Altec Lansing.

I also learned that Japan has a vital live music scene. Tokyo alone boasts no fewer than seven symphony orchestras—all thriving. Jazz and blues clubs are also extremely popular. I was beginning to appreciate how much the country cherishes music, and I realized that a high proportion of its citizens must know what the real thing sounds like. Perhaps this is one reason why the Japanese are among the world’s most avid consumers of high-end audio gear.

I came away from my visit with Stig and Jonathan impressed that, through respect and deference, they had been able to integrate themselves and their new ideas into Japan’s old-school cartridge community. Proof of their success in that regard came one year during a boron shortage, which brought stylus assembly to a standstill. Benz Micro’s Japanese distributor came to the rescue, playfully sending Jonathan a supply of boron—in a pizza box.

 

A High-End Playground
That night, Esoteric whisked me to Dynamic Audio 5555, the largest high-end store in Tokyo. The facility, which has been in business for fifteen years, consists of seven jam-packed floors of equipment and listening rooms. Each floor has its own autonomous manager with discretion over matters such as the brands that floor will carry. Consequently, Dynamic Audio reflects a variety of tastes and philosophies as represented by the dazzling selection of equipment.

For my visit, the store’s Senior Managing Director, Toshiaki Kawamata, arranged a demo of some of its most bespoke gear. Four massive Esoteric Grandioso M1 monoblocks bi-amped a pair of Japanese Hiro speakers. The latter are custom-made, built to order, take five months to deliver, cost $220,000 a pair, and are not exported. Also visible from my vantage point in the demo room was equipment from dCS, Mark Levinson, TAD, Sonus faber, Genesis, and an Air Force One turntable.

On other floors, just as Sheen had foretold, I saw healthy dollops of Western brands, especially JBL, McIntosh, Tannoy, and Altec Lansing. According to Kawamata-san, these brands sell briskly. He also told me that despite the Japanese market for high-end audio being sluggish overall, business at Dynamic is strong. He attributes this good fortune to the store’s bustling location near the famous Tokyo Tower, its proximity to multiple upper-class neighborhoods, a selection that offers something for everyone, and a dedicated, passionate customer base. Whatever the reasons for this store’s existence and success, my advice to audiophiles visiting Tokyo is to put Dynamic Audio on your must-see list.

The Growth Imperative
I began my time with Esoteric in the company’s Sound Room, located deep within its Tokyo headquarters. The space pulls out all the stops to create an ideal environment for evaluating gestating products. During my visit, the setup included Grandioso Series electronics driving the ginormous Avantgarde Trio XD horn speakers. Through this rig a live, solo voice-and-piano recording of Diana Krall was skin-crawlingly realistic. I also spun up my trusty Michael Wolff 2am jazz CD, which on this system had the best string bass rendition I’ve ever heard: deep, dark, and tight as a drumhead.

I could have listened to music all day, but there was much to learn from Esoteric’s perch as one of Japan’s foremost high-end producers. The company, which before expanding into electronics made its reputation building what many consider the world’s best disc transports, recently broadened its lineup. Indeed, Esoteric has moved in both upward and downward directions. I wanted to understand these moves, but the question foremost on my mind was why Gibson had bought the brand.

Part of the answer, related by Hiroshi Oshima, TEAC’s Business Unit Manager for the Audio Products Division, involves Gibson’s new mission statement. Though historically focused on musical instruments, Gibson decided it wanted to provide solutions for the entire musical chain—from creation to recording to playback. Together, TEAC and Esoteric gave Gibson a strong and immediate presence in both the middle and back end of the chain.

But I suspect there is more to it. The sad fact is that guitar sales, Gibson’s bread and butter, have declined steadily for several years. In reaction, the company has undoubtedly sought to shore up revenues through diversification and new markets. TEAC and its subsidiaries fill that bill as well.

The relationship between Gibson and Esoteric, according to Esoteric President Haruji Katsumura, is largely hands off. Esoteric has total independence when it comes to product development, marketing, and sales. In return, Gibson expects its new subsidiary to be self-supporting and to generate growth. That’s where the product-line expansions come in.

 

To meet its new parent’s mandate for growth, Esoteric began offering both more affordable and more costly versions of its core products. In addition, the company has started moving into new product categories. The first of these is the N-05 network player, designed to ward off revenue erosion as physical media fades. (Though bustling Tower Records stores attest that Japan is behind the U.S. in transitioning from physical media, the trend has begun and will inevitably accelerate.) The goal of this portfolio expansion is not mere revenue protection but, as Katsumura-san put it, to “break through high-end audio’s revenue ceiling.” This imperative has overridden any inclination to remain within a carefully cultivated niche market.

During my visit to Esoteric, I was fortunate to meet Motoaki Omachi, the company’s semi-retired founder and a luminary within the Japanese audio industry. I asked him whether he thought there is a “Japanese sound.” He responded by reminding me that in Japan quality raw materials—or raw ingredients, in the case of food—are highly prized. These ingredients—like the fish in sushi, the exquisite fruit exhibited by Tokyo street vendors, or the wood used in lacquerware—are deemed to need no hyping. Rather, their quality should be allowed to speak for itself. In the audio world, music, as captured in a recording, is the “ingredient” that must be preserved. The Japanese “sound,” therefore, is more of a philosophy whereby audio’s goal is to provide a vessel through which music’s inherent sonic and emotional virtues can flow unimpeded.

Every designer I met subscribed to the philosophy so elegantly expressed by Omachi-san. Naturally this perspective has sonic ramifications. Tetsuya Kato, Esoteric’s VP of R&D, ranks neutrality and low distortion as his highest priorities. Anything that adds flash and hype are anathema to him—just as overwhelming sauces are anathema to a good sushi chef. In addition, I learned, the Japanese place great importance on a system’s spatial capabilities. This is because most Japanese homes are too small to accommodate gear capable of producing full orchestral scale. Thus, it falls to even modest audio systems to create a convincing representation of the original space and atmosphere.

Moving from meetings to manufacturing facilities, I saw first-hand just how serious Esoteric is about its philosophy of purity. The immaculate plant is a “clean” environment. To enter, I was obliged to don footsies (too small for my American feet), a hair cap (too tight for my American head), and a smock (too snug for my American belly). Once inside, I encountered the high-tech, streamlined facility I had expected at Lyra—along with a mind-bending degree of meticulousness.

For instance, unhappy with the sound of every commercial solder it could find, Esoteric developed and now exclusively uses its own version. Discrete components such as resistors do not rest on a PCB, as they normally do; rather, they “float” above the board. Esoteric feels this results in less electrical interference. The plant even has machines that smooth the insides of the PCB holes through which components are mounted, which reportedly improves conductivity.

My visit to Esoteric made it plain that, far from resisting an imposed growth, the company has embraced it. The atmosphere there is one of liberation and excitement. A fortuitous combination of investment and independence has given Esoteric an opportunity to more broadly apply the same philosophy and attention to detail that elevated its transports, and it’s doing so with verve.

 

Drivers of Innovation
Panasonic is nearly one hundred years old. The company’s epic history is told at the Konosuke Matsushita Museum outside Tokyo. I’ve been to many company HQs that have a wall or a room devoted to product evolution, but I’d never before toured an entire museum devoted to the subject. In walking through the exhibits, I could trace Panasonic’s evolution from a maker of humble electrical plugs, sockets, and fittings to the global consumer-electronics colossus it is now.

Much to my surprise, I also discovered that many of today’s most advanced management practices—social consciousness, employee profit sharing, an emphasis on customer service, succession planning, MBWA (Management by Walking Around), and separate P&L centers to better manage growth—were pioneered long ago by Panasonic’s founder, Konosuke Matsushita.

The museum doesn’t neglect the 1965 launch of the original Technics. The brand was introduced as part of a then-new corporate focus on “pure sound.” Thus, from its very inception, Technics reflected the Japanese audio industry’s philosophy of music without adulteration.

After my museum visit, I traveled to Osaka to meet Michiko Ogawa, who is Director of the Technics business unit. Interestingly, she is also a popular pianist and singer in Japan. Ogawa-san gave me her perspective on why big companies are taking new—in the case of Sony—or renewed—in the case of Panasonic—interest in the high end. She told me that during Japan’s long depression consumer electronics sales went flat. In response, both Sony and Panasonic, like Gibson, began seeking new markets with growth potential.

Yet it’s no secret that high-end audio has always been a cottage industry. So why invest there? The impetus, according to Ogawa-san and echoed by Sony executives I’ve met, can be summed up in two words: high resolution. To elaborate, the Japanese view is that the recent widespread availability of hi-res source material can serve as a promising catalyst for high-end audio growth. Hi-res audio also fits into Panasonic’s (and Sony’s) involvement in the ongoing development of Blu-ray and other hi-res video technologies. As Technics’ CTO Tetsuya Itani put it: “It makes sense for Panasonic to offer audio that can deliver a level of resolution and involvement similar to high-end video.”

Like Esoteric, Technics is deliberately independent of its parent. The management team is completely separate from Panasonic’s, as is R&D. Yet the parent company is investing generously, giving Technics the wherewithal to push technological advancement. Technics also gets to piggyback on Panasonic’s expansive manufacturing and training facilities. What does Panasonic get out of the deal? Technology that may prove useful elsewhere, “halo” audio products, and a new revenue stream.

Because the Technics R1 References Series is so chock-full of technical advances, I asked Ogawa-san if she has seen a change in that regard. She told me that Technics views innovation as a means of competing against boutique brands that can’t afford a similar level of R&D. Culturally, this innovation is made possible because, as Sheen had noted in our meeting, lifetime employment is fading—and with it the cultural proscriptions against independence and individuality. Indeed, Ogawa-san encourages her engineers to pursue any ideas that will allow Technics to blaze technology trails.

 

Craftsmanship Goes High-Tech
Despite its audio industry’s newfound enthusiasm for innovation, Japan’s culture of craftsmanship and honoring the past isn’t going away. These disparate forces are leading to products that are both innovative and traditional. Examples were everywhere on my trip. Lyra cartridges are highly advanced designs but are built in a decidedly low-tech environment. They’re voiced by ear by one man. The drivers and crossovers in Sony’s speakers are similarly progressive; yet they’re mounted in a cabinet built with maple harvested in November (that being the month in which the wood is the hardest) from a single forest in Hokkaido. Technics’ new SL-1200G turntable features a state-of-the-art direct-drive motor but looks identical to the venerable SL-1200 it replaces—S-shaped tonearm and all.

To get a sense for how Technics converts this duality of old and new into componentry, I visited Panasonic’s Manufacturing Innovation Center, or MIC, a one-hour bullet train ride north of Tokyo. Here, on an eight-building campus, the company builds Panasonic TVs, set-top boxes, LCD products, and the top Technics components. Established in 1967, the MIC is the only remaining Panasonic TV factory in Japan (the rest are overseas). As such, it’s reserved for the highest-end models, such as 4K HDR sets. In 2014, the facility took on production of the Technics R1 Reference Series and SL-1200G turntable. (Other Technics products are made in non-Japanese factories, but Technics always has its own line and staff.)

As with sushi chefs, training is taken very seriously here. One of the campus’ buildings is a dedicated “dojo,” or training center, that teaches new employees everything from the requisite skills and safety procedures to company etiquette. Once graduates have completed their training, they’re rated on skill level. This rating is indicated by their belt color, with red being the most skilled.


Although Panasonic builds both its top TV and top audio components under one roof, the two production operations are physically separate and starkly different. Those distinctions begin in the training regimen. Employees destined to work on the TV assembly line receive two to three days of training; those who will be building Technics components receive a month. Further, only red-belted employees may work on Technics gear.

The TV assembly area is exactly what you’d expect from a volume-oriented facility: lots of machinery making quick, efficient movements. Humans play a supporting role—for instance, lining up sub-assemblies properly so that the machines can do their thing. Everything in this area is designed for repeatability, quality, and speed.

The Technics assembly area is a contrast in every way. Here, speed isn’t a priority; the pace is leisurely. As at IT Industry, most of the work is done by people, and those whom I saw worked carefully and convivially. Machines provide support. For example, I saw a worker, whose job it is to fashion SL-1200G platters, use a machine only to identify minute imbalances that would escape a human eye. He exemplified how Technics is melding the seemingly mutually exclusive: craftsmanship and advanced production techniques.

 

In Retrospect
What did I learn on my journey? I learned, first and foremost, that Japan’s culture affects its audio industry every bit as much as American culture and Swiss culture impact their respective industries. Just as America’s audio industry reflects the U.S.’s independent spirit and the Swiss audio industry adheres to the country’s emphasis on high-priced quality, the Japanese audio industry is a microcosm of Japan itself.

Specifically, the Japanese conviction that prized ingredients need very little enhancement translates directly into a desire to create audio components that showcase rather than “enhance” the music. And when those self-effacing designs are ready to be built, the production process reflects the same meticulous execution practiced by sushi chefs, bonsai pruners, and lacquerware artisans.

Another cultural imperative, borne of high population density and a historical corporate commitment to long-term employment, is the need for cooperation. In audio, this has led to team-based design decisions and sonics that don’t stray far from an emphasis on neutrality and musicality. Lately, however, the social safety net has been loosening. And while this hasn’t altered the goal of self-effacement, it has had the unexpected consequence of encouraging technical risk-taking as a means of achieving it.

Finally, the Japanese audio industry, like every industry in Japan, is looking for ways to recover from and move beyond the country’s long recession. In audio, that means big companies moving into the high end are in search of new revenue streams, while smaller companies expand into new markets to suit the populace’s changing spending habits.

All these factors are molding the Japanese audio industry into one that preserves long-enshrined cultural virtues while finding ways to move aggressively forward. We’re already reaping the results, and there is much more to come.

By Alan Taffel

I can thank my parents for introducing me to both good music and good sound at an early age. Their extensive classical music collection, played through an enviable system, continually filled our house. When I was two, my parents gave me one of those all-in-one changers, which I played to death.

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