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Why China Is Dissing Toshiba

BEIJING – Toshiba’s laptop sales have dropped sharply in China amid a slew of bad publicity in the state media, some of it laced with jingoism and anti-Japanese rhetoric.

The media reports, which began in May, accused the Japanese electronics giant of discriminating against Chinese customers by refusing to pay compensation for an alleged flaw in some of its laptops.

Toshiba laptop sales in China, one of the fastest growing markets for personal computers, dropped to 17,697 units in the second quarter of this year from 18,129 units in the first quarter, according to International Data Corp statistics obtained by Reuters on Tuesday.

That marked a steep decline in market share, from 19.4 percent of the Chinese laptop market in the first quarter to 15.4 percent in the second, according to IDC statistics.

A spokeswoman for Toshiba at Prap Beijing Public Relations Consultants acknowledged the drop in market share and said Chinese media reports may have played a role in the decline.

She said fierce competition in the laptop sector, in which domestic player Legend Group now claims a dominant share, was another likely factor.

Toshiba’s troubles illustrate how lingering Chinese anger over Japan’s wartime atrocities pose a minefield for Japanese firms doing business there.

The media reports stemmed from editorials published by a state-run Chinese news portal, about Toshiba’s settlement in 1999 of a lawsuit in the United States.

The U.S. class action in the state of Texas alleged there was a defect in the floppy disk controller of some Toshiba laptops that could potentially corrupt data on floppy disks.

Toshiba said there was no evidence floppy disk controllers had corrupted data in any of its millions of laptops. But it eventually chose to settle the case, avoiding the risk of a potentially devastating courtroom loss in Texas – a state with high punitive awards.

Under the $1.05 billion settlement, Toshiba agreed to install new floppy disk controllers in computers sold in the United States and to provide eligible U.S. customers with coupons ranging from $100 to $225.

It has won similar suits in other countries, and has declined to offer payments to consumers outside the U.S., including in Japan and China.

But the Chinese Internet reports saying that Toshiba “looked down on Chinese” spread like wildfire, with official newspapers and television demanding compensation.

China Central Television ran a 30-minute prime time special called “Investigative Report: the Toshiba Incident,” in which it quoted Chinese laptop buyers accusing the company of “racial discrimination” and “insincerity.”

Several class actions have been filed against Toshiba and at least one consumer website and a chain store said they were boycotting Toshiba products.

The reports had faded in recent months, and it was unclear whether Toshiba sales were recovering. An analyst at IDC said figures for third-quarter laptop sales were still unavailable, and Toshiba declined to release country-specific figures.

Ichikawa, the spokeswoman for the company, said the lawsuits in China were still pending and that Toshiba would abide by court rulings.

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