It was almost forty years ago when I got my first job as a freshman in Japan, and to celebrate my “success,” I bought a high-end watch made by Seiko –a large watch manufacturer in Japan. The watch was 100% mechanical, but the accuracy was incredible; it was off by only one second over a seven day period. The price of the watch was 50,000 yen, and my monthly salary was 57,000 yen. I justified the lavish expense by telling myself it was reasonable since I reached the status of an elite businessman (I was young). I loved that watch and used it for over 15 years until I replaced it with a digital quartz watch. The new watch was made in Japan and maintained its time accuracy within one second per month. Prices ranged between 10,000 and 20,000 yen.

A couple years ago, I was shopping at a department store and came across a bunch of low-priced watches. They were part of a product line from a Japanese watch company but manufactured in China. They were pretty bland, but suited my needs. There were only two price points for these watches -- 1000 yen and 2000 yen. The prices were determined by the countries of origin for the parts. Parts for the low-end priced watches were manufactured in China, and parts for the higher-priced watches were manufactured in Japan.

The metallic watch bands are adjusted at the store, and were included in the price. Since this took about 20 minutes, I though this labor could be the most expensive variable in determining cost. I commented to the store manager about the labor cost for such a low-priced watch, and asked if he was making any money on my sale. He smiled and explained that the cost of the watches shipped from China is less than half of his selling price. That’s amazing! Analog watches are made up of six main components, a tiny sliver of quartz, a metal wrist band, and a bunch of other parts – all this including assembling for only 500 yen (about $5)!

I was sold on the low prices, but I was concerned about the reliability. I hedged my bet and bought three watches for 3000 yen. That way, if one or two break, a backup will be readily available. It’s been well over two years, and all three are still working. I set one for Japanese time, one for Eastern Time (US), and one for Pacific Time (US).

I was very impressed with the quality and reliability from the watches. I wondered if the quality control measures from this Chinese manufacturer played a part in this. A common problem with the watches is a short battery life. The batteries for all three died within 18 months, much sooner than I expected. The problem was a

poor circuit design that was not effective for the electric power consumption and it could not prolong the battery’s life to its full expectancy.

No big problem. I returned to the store where I purchased them to exchange the batteries. The cost was 525 yen for each -- more than half of the original price! The initial purchase was not substantial and the watch manufacturers are probably enjoying brisk sales because of its low price point. As the saying goes, you pay cheap, you get cheap.

Another year is almost over. The publication department at DKN Research will be closed for the next few weeks to make special events during the holiday season.

Happy Holidays to you and all your families!

Dominique K. Numakura
DKN Research, www.dknresearchllc.com

Headlines of the week
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1. Furukawa Electric (Major cable manufacturer I Japan) 12/5
Has developed a new manufacturing process of polymer free carbon nano tube wire. The new CNT wire has 20 times higher conductivity.

2. Panasonic FSC (Major assembling equipment supplier in Japan) 12/6
Has rolled out a new screen printer for solder paste. The new printer has short cycle time (15 sec./board) for broad range of work sizes.

3. Shibaura Mechatronics (Assembling machine manufacturer in Japan) 12/10
Has unveiled new full automatic COG (Chip on Glass) assembling machine “TTC-2500” combining outer lead bonding and flip-chip bonding.

4. AUO (Major display panel manufacturer in Taiwan) 12/11
Has been actively investing for development and manufacturing of active matrix type OLED panels. AUO is optimistic to improve the current low process yields.

5. Pioneer (Major electronics company in Japan) 12/11
Has unveiled the world thinnest and lightest BD/DVD/CD writer (133 x 12 x 133 mm) for Windows 8 based mobile PCs.

6. Kyocera (Major electronics company) 12/12
Has introduced atomic diffusion bonding process for new quartz device to make the reliability five times higher.

7. Panasonic FSC (Major assembling equipment supplier in Japan) 12/12
Has developed a new hybrid assembling process combining COG (Chip on Glass) & FOG (Flex on Glass) for mobile devices.

8. Panasonic (Major electronics company in Japan) 12/13
Has started the volume production at new plant in Malaysia. The new plant covers whole process from wafer processing to final assembling.

9. Toshiba (Major electric & electronic company in Japan) 12/14
Will roll out new white LED based on GaN-on-Si structure as the lighting source. It is cost competitive compared to traditional sapphire-based LEDs.

10.  Innolux (Major display panel supplier in Taiwan) 12/16
Plans to expand the global market share to 20% from 15% by the new orders of Windows 8 relating mobile PCs.

Find the full articles at dknresearchllc.com/DKNRArchive/Articles/Articles.html.