BREAKING NEWS
Today in Osaka District Court in Osaka, Japan, Onkyo Home Entertainment Co. Ltd. (formerly Onkyo Corp.) filed for bankruptcy ending a long and storied history of innovative audio products. The action was taken less than a month after the company declared bankruptcy for two of its major subsidiaries in April. Now, the parent company has fallen as well…
See more on the Onkyo bankruptcy…
This is the sad end of a great company that conceived, engineered, manufactured, and distributed globally some of the finest audio gear that ever existed in the industry. Its 76-year-long history of innovation began to fade as company managers headed to court in Osaka to declare bankruptcy.
In its bankruptcy filing, the company listed total debt of “about ¥3.1 billion” (US$24 million), according to a report by the Nikkei. But the truth is that this day has been a long time coming as the company struggled to transition with a changing audio marketplace.
Just Last Month, Two Subsidiaries Declared Bankruptcy
Just last month, I reported that the company had received approval from the Osaka District Court allowing it to place two of its major subsidiaries into bankruptcy. These subsidiaries are Onkyo Sound Co. Ltd. (ONS) and Onkyo Marketing Co. Ltd. (OMC). In February, Onkyo had announced its intention to seek bankruptcy protection for these divisions – one an OEM manufacturing company producing products for other brands (ONS), and the other a company formed to develop the market in Japan for custom integration systems (OMC).
The main Onkyo corporate website address was redirected to a different address where I discovered two important documents. One of those documents, titled Notice Regarding Petition for Commencement of Bankruptcy Proceedings, explained that the company had* gone to the Osaka District Court to file papers requesting authorization for Onkyo to declare bankruptcy. And, in what seems to be a bit of an unusual move, the court immediately approved the commencement of the bankruptcy proceedings for Onkyo.
This document also revealed a total debt of about ¥3.1 billion but gave no indication of what is remaining in total assets. Given that the company has sold off several of its divisions, and bankrupted others, there likely are not a lot of remaining assets…if any.
CEO Letter Explains the Decline into Bankruptcy…and Apologizes
The second document there was a letter titled, “To all concerned.” It is written by Onkyo Home Entertainment Co. Ltd. President and CEO Toru Hayashi. After first explaining the company had in fact filed for bankruptcy, Hayashi then apologized for this action.
We sincerely apologize for the inconvenience caused to our business partners, shareholders, and related parties. I would like to thank you…
Toru Hayashi, President and CEO of Onkyo Home Entertainment Co. Ltd.
Hayashi’s letter reviewed the many events that have taken place bringing the company to this point. While it is pretty detailed, it mostly reveals that the company has died a death of a thousand cuts. The letter goes in depth explaining an unraveling situation. Below, I summarize some of those facts he revealed.
Factors Driving the Company to Bankruptcy
- A canceled deal (Viper Holdings/Sound United, 2019)
- An unfulfilled deal to generate cash through a significant debt-for-equity swap with private equity groups
- Time delays with both of the above deals (and others being pursued) that added to the pain of draining cash
- Deepening insolvency
- A painfully delayed deal to sell the company’s AV division (VOXX/11 Trading)
- Delays in regulatory agency approval
- More delays…more cash drains
- News of the deals causing existing product sales to languish
- COVID closing world markets, while costs continue to drain cash
- Supply chain challenges – especially the semiconductor shortage
- Insolvency again
- Delisting from the Tokyo Stock Exchange
- Asset sale – Onkyo Sports Co. Ltd
- Asset sale – Digital Life business to private equity fund EBO
- Asset sale – E-Onkyo, sold to a “French company”
- Asset sale – Onkyo Co. Ltd., sold to MBO
- Bankruptcy of Onkyo Sound Co. Ltd.
- Bankruptcy of Onkyo Marketing Co. Ltd.
Hayashi returned again to the chip shortage, which after all of this, still “has not improved at all.” This hampered the company’s ability to introduce new products…or to be able to deliver current ones. Also, the chip shortage killed off their ability to scale their OEM manufacturing business, as OEM customers couldn’t get enough chips for their projects either.
A Perfect Storm
At the end of the day, all of these issues combined to add to the company’s struggles. Even deals that were actually consummated took so long to complete that the funds raised were not enough to bale the company out. It was, in a sense, a perfect storm. No single issue from this long list of issues killed the company. But collectively, they were unsurvivable.
But truthfully, the company’s problems began well before 2019. Onkyo thrived during the formative and growing years of audio. It excelled in leading the industry into upscaling product assortments and developing an enviable reputation for an optimal mix of product build quality and longevity, coupled with high-end sonic performance.
The company employed some of the most brilliant audio engineers in our industry. But, over time, as the industry began to shift to digital music and digital music players, the king of analog audio struggled to adapt.
Onkyo: A Remarkable Company with a Remarkable Story
There are many remarkable elements to Onkyo’s story, beginning with its origin story. Onkyo was founded in 1946 by Takeshi Godai, a former Matsushita engineer. He had been bitten by an entrepreneurial bug and looked to build his own company. For those familiar with business practices in Japan, this in itself is incredibly unique – as most worked for massive corporate conglomerates.
Onkyo’s first products included high-quality transducers and loudspeakers. In Japan, Onkyo became a revered brand that for many years was considered the best loudspeaker brand in Japan…especially in those early days.
The company went on to diversify into turntables, amplifiers, tuners, and other audio gear. Having been founded by an engineer, the company vigorously pursued the highest engineering standards. Products featured amazing build quality, technical innovation, and industry-leading sound quality baked into every model they built.
Onkyo the Company is Gone; Onkyo the Brand will Go On
Unless someone steps in to buy the company out of bankruptcy, which at this point seems unlikely, Onkyo the company will disappear. But Onkyo the brand will continue on. VOXX, International purchased Onkyo’s AV division in 2021 and has contracted with Sharp to manufacture products at a facility once jointly owned by Sharp and Onkyo.
So VOXX carries the Onkyo ball down the field now. Let’s hope they have a savvy business plan to revitalize the brand.
A Personal Note
I’m not going to lie, this story makes me very sad. As some Strata-gee readers know, I spent 14 years at the company, leaving in 1999 as its Vice President of Sales and Marketing. They were great years with a great company. I had the opportunity to work with many of the finest folks in the business – not only the owners and engineers but other company managers, creative marketing folks, product development & design folks, sales reps, distributors, dealers, and many more.
It was an invaluable education in business and I will treasure those memories for the rest of my life.
So I’ll end this story by simply saying to Onkyo and all who were associated with it: Goodbye old friend. I shall never forget you!
See more on Onkyo products at the website maintained by VOXX at: onkyousa.com.
CORRECTIONS
* May 15, 2022 – Added the word “had” which had inadvertently been edited out of the original text
Ouch! Ted, I know this hurts. Loved the brand, loved you, but another one bites the dust.
Jeff
Thanks Jeff… Love you too man. You are part of my fond Onkyo memories. We did a lot of good business together in the day, didn’t we!
At some point didn’t Gibson have a major investment in Onkyo? Did that have no impact on this bankruptcy?
Aaron,
You are correct. Yes, the Gibson deal back in 2012 was part of this adventure, too. Gibson’s then CEO had visions of grandeur dancing in his head and decided to buy several consumer electronics companies, including Onkyo and Teac/Tascam.
As one of the long list of unfortunate incidents in Onkyo’s lifespan, financial partner and part owner Gibson Brands (formerly Gibson Guitar) itself went bankrupt in 2018. This led Onkyo to seek a new partner, which first turned out to be Sound United…and then things went downhill from there.
Thanks for your question!
Ted
Hi Ted,
Thank you for the latest update. Could you clarify the “Teac / Tascam” information? As a warranty service provider for them (and Onkyo over the decades), we were ghosted upon Onkyo’s initial demise 2 years ago by Onkyo / Pioneer / Teac – but not Tascam.
I’m glad to hear you had great experiences from the sales and marketing arenas, you might entertain an eye-opening experience learning how the company dealt with warranty repair shops over the years. It was less than stellar.
As an aside, as a long time fan, I still run a TX-108 in the garage and the P306RS + M508 in my home. I still use the countless tapes made on a TA-2058.
I also noted that a local Costco is selling a new Onkyo receiver, so maybe Voxx can keep the name alive.
Hi Mike,
I’ll try to help, but that story thread I didn’t follow to the very end.
I’ll try to hold the chronology – On January 4, 2012, I reported that Gibson Guitar announced it had acquired a majority share of Onkyo USA and further invested in Onkyo. (Note, as is common in these types of transactions in Japan, Onkyo also purchased a small stake in Gibson). Later the same day of my initial report, I came to learn more and provided an additional report on the deal. Later in January, I had the opportunity to meet with both Onkyo’s CEO and Gibson Guitar’s CEO at CES to get an even deeper dive into the deal, and reported on the meeting on January 18, 2012.
Then, just days later, I reported on January 22, 2012, that Gibson Guitar announced another acquisition, this time of Teac/TASCAM. This deal, in theory, did not involve Onkyo…but later I learned that Gibson’s CEO conceived that these two companies he had ownership in – a majority of Teac/TASCAM, and a share of Onkyo Corp – should be working together. Shortly after that time, the two companies bought shares in each other and began a partnership of sorts – for example, Onkyo got the worldwide distribution rights to Teac. I did a bit of a deeper dive analysis of this emerging circle-of-partnerships situation in early 2013…
Flash forward a few years to 2017, where I reported that Gibson Guitar, now Gibson Brands, took majority control of Onkyo Corp. Then in 2018, Gibson Brands, after a couple of more acquisitions, had fallen on hard times and ultimately had to declare bankruptcy. When Gibson fell into bankruptcy, Onkyo management shifted into high gear to separate themselves from Gibson, as I mention in the article at this link, so it didn’t pull them into bankruptcy as well. When they separated, Teac/TASCAM went away with Gibson who still owned it.
I don’t believe the partnership between Onkyo and Teac continued…I believe it was severed at or around that time. It turns out that Gibson’s CEO owned the Teac shares personally and that was a bit of a complicating factor in the Gibson bankruptcy.
So that’s pretty much all that I know. It is quite possible that you got ghosted, because Onkyo staff often felt in the dark as big deals were made and fell apart, with little communication throughout the organization…causing major disruption of “normal” activities.
Don’t know if any of this helps you, but that is pretty much what I know.
Good luck and thanks for your thoughts!
Ted
Ted,
I know this hits close to home for you given your relationship and experience with the brand and the company. But I’d just like to say that what you’re doing now is every bit as large a contribution to the industry, if not larger, than what you accomplished in your days at Onkyo.
Keep it up!
Thanks Paul – I really appreciate the sentiment.
Ted
I love Onkyo, a lot of their early pieces were incredible from the 70’s and 80’s. I have three sets of speakers by them from those days’ U-6000, U-8000, and the incredible E-804A Scepter. All of which were only sold in Japan. I also own a TX-4500 receiver, built like a tank. It is a shame to see this happen to them. I still to this day think they could have dropped the home theater market and gone back to their roots with individual speakers and component separates like KLH is doing now. I really think people want to go back to those days, vintage audio is really hot right now.
I still have my TX 2500, listen to it every day, and it still sounds and looks better than anything on the market the last 40 years. I still remember the day I bought it in 1979. Thank you Onkyo.
A sad end indeed. In college, I worked for a local store that sold jewelry, small home goods, cameras, and stereo equipment. I was hired on as the “audio guy” since I had worked at Circuit City in high school and was a rabid (but broke) audiophile. Our Onkyo rep came by and told the store owner that one employee could order any one piece of equipment for just under cost due to our good sales. I begged and pleaded with my parents to help me take advantage of this, and since Christmas was coming and the grades were good, they said okay. I was soon the proudest owner in the world of an Integra TX-SV919 THX receiver. I believe it was one of the first in the state.
It was an amazing device that moved me leaps and bounds up the audio ladder. Watching laser discs through it (I know, I know, it was a long while ago…) was an epic experience. I eventually added an Integra M-504 amplifier to the mix for much more powerful 2-channel listening. To me, both of these units had been aspirational items that upon acquisition, turned out to be even better than I could have dreamed. They oozed quality in multiple facets, even though they were still rationally priced. I enjoyed years of listening and movie watching through those and never stopped appreciating the engineering quality and value that they provided, even when I could afford much higher-end equipment. I still have both to this day, though they are currently slumbering on a shelf. They have always been inside and wonderfully cared for, as they deserved. I am so very sad to see a company which provided me with such amazing enjoyment disappear, and I am grateful to the author of this article and his colleagues for playing such a part in my immense happiness. I will miss Onkyo, but treasure my beloved components and remember when…
Hey J. Kelley,
Great minds think alike! I myself own the TX-SV919THX, a pinnacle product for us at the time. When I left the company in 1999 to start the company that now produces this website and newsletter, Onkyo Japan management generously gave me their top-of-the-line system as a farewell gift.
Thanks for commenting!
Ted
To Both Frank B. and Neil S.,
The series of receivers you both refer to (TX-2500, -4500, -6500, -8500) was an epic series of Onkyo receivers that helped the company to nearly dominate the category at times. And amazingly, they played a role in my joining the company.
That series launched while I was still working in retail – specialty AV retail specifically. We brought the line in specifically for those models. Their highly demonstrable Quartz-Locked Tuning was incredibly popular with consumers. Demo – switch off QLT and deliberately mis-tune an FM station…then engage QLT and watch the system automagically lock on to the signal. This closed a lot of receiver sales for me. And it gave me a really positive impression of the company.
Years later, I had moved out of retail and into manufacturing. When I learned of an opening at Onkyo, I just knew I had to get it. And much of my passion was due to these models. (Also the TA-630DM cassette deck)! It was largely that passion that I honestly displayed for the brand that landed me the job of running their largest region – the Eastern third of the U.S.
Thanks for your reminiscing… You warmed my heart!
Ted
Ted, we had some good times, made some lifelong friendships developed some excellent product and did some great marketing during our tenure together. The first THX Receiver, The Snake Cam in our advertising and so much more.
We did indeed have some great times…many of them! I’ll never forget them, nor your contributions!
Thanks Mike!
Ted,
I hope life finds you well in health and good mood recently.
If Toshiba, Pioneer and others – with reduction of product lines, unlike any decade in history of their existence – are not enough, now strikes Onkyo.
Certainly not surprise at this time, but almost clinically depressive picture, that present times are painting with uncertainty.
Volken