For decades, consumers worldwide looked to Japanese companies such as Sony, Sanyo, and Matsushita for consumer-tech hits like VCRs, portable cassette- and CD-players, camcorders, and DVD players. But in recent years, nimble Asian upstarts have challenged Japan’s dominance by dipping into a common pool of electronic components to assemble those gizmos at prices the Japanese can’t match. Interlopers such as Samsung, LG, Legend, and Acer built regional and even global brands as Japan’s stalwarts struggled to maintain their lead.

Are Japan’s days as a consumer-electronics power numbered? Not if 2003 is any indication. Thanks to a surge in demand for the latest array of digital products, sales and operating profits are climbing at Matsushita, Sharp, Sanyo, and even troubled Sony. While the Japanese have largely left the low end to China, Korea, and Taiwan, they’re battling to retain control of the market for top-of-the-line gear that requires precision manufacturing and offers beefier margins. At the same time, some companies are outsourcing manufacturing to upstarts in China and elsewhere, and even selling screens, chips, and other parts to rivals who make and sell the products under their own brands.

Consumers certainly can’t seem to get enough of Japan’s high-end stuff. At the bustling Bic Camera consumer-electronics bazaar in the Ginza, Makoto Itabashi walked away with a 50-inch Panasonic Viera plasma TV. The price tag: $7,400. But the splurge is worth it. Watching the TV feels “like I’m in a movie theater,” he grins. He’s not the only one who likes the big screens: Sales of plasma TVs jumped by 125% last year, according to the Japan Electronics & Information Technology Industries Assn.

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