FORTUNE — A much diminished electronics sector in Japan is buckling further still. How much more retrenchment and pain is needed to succor its once triumphant tech industry is the question now as Sharp Corp, one of Japan Inc.’s bigger beasts, faces ruin. Japan analysts are also pondering who could be next.

Mirroring Japan’s post-war rise from tinkering electronics amateurs to masters of the transistor age, Japan’s biggest TV maker Sharp might not even make it past the 100-year-mark it celebrates this month suggest some observers. Wages and jobs have all been slashed, but Sharp is still suffering massive losses while its share price has fallen dramatically. (This year it is down 73%.) Meanwhile, the woes of other giants — Sony (SNE), Olympus, and others — are making the industry’s fall from grace as palatable at home as a plate of Made-in-China McSushi. “The good old days walked out the door and no one noticed,” says Hideki Onda former distributor for Apple (AAPL) Japan, referring to the sector’s sudden loss of competitiveness.

What happened? Japan’s electronic makers just failed to keep up he says. Unlike competitors such as Apple, Japanese manufactures of late have not engaged the world, nor even their domestic customers, and are now paying the price. Once undisputed Titans of the consumer electronics with combined sales of $600 billion — equal to the economy of the Netherlands — now Japan’s top electronics makers are shadowed by the likes of Samsung’s $163 billion capitalization and Apple’s $634 billion. In contrast Sony, Panasonic and Sharp combined are now worth only $54 billion at current market values.

MORE: At Olympus, a drama with plenty of twists

Amid weak demand and a painfully strong yen, Panasonic (PC), Sony and Sharp together lost billions last year, while Sharp alone owes $31 billion to the banks and other bond holders. Such figures underline the beating given Japan’s electronics industry by foreign rivals led by South Korea’s Samsung Electronics.

It is not that Japan is short of engineering ability, brains or innovation says Gerhard Fasol a technology consultant based in Tokyo. But in order to thrive the country’s major firms need to restructure and move to new business models. “Japan has not failed to capitalize on the digital revolution, but the successes/failures are not according to expectations…so many of them are in trouble,” he says.

The once lauded “kaizen” system, implementing constant refinements to improve quality by tweaking the production process, mimicked world-wide, is now discredited in one view. “The Japanese business model has reached a dead-end,” writes Yasuyuki Maruyama senior researcher at the Yomiuri Research Institute in a recent report.

And yet Japan still has much to offer in terms of intellectual property and innovation. But like Sharp, NEC and Panasonic are all in the same trap says Tokyo-based technology analyst William H. Saito. “They have a culture that is not required at this level [of innovation]. They are not converting to new products or markets. Instead they create low hanging fruit for other Asian economies.”

MORE: The agony of Japan Inc.

More agile rivals such as Samsung and even Chinese competitors make it difficult for Japanese manufactures to compete. As such, analysts forecast that the bloodletting is far from over yet. “Japanese corporations are unable to cope with falling prices and have no clue how to take advantage of their own strengths. Struggling to compete in overseas markets with nimbler rivals like South Korea’s Samsung, their business results have collapsed,” writes Maruyama.

Structural and systemic weaknesses aggravate the problems. Outmoded management practices and lack of leadership have led to an inability to form dynamic global teams, while they tend, in the sector, to put weak companies together to create mega-firms like Sharp that lead to bankruptcy explains Saito. “This means that companies like NEC are next on the hatchet,” he adds ominously. Many agree. Years of decline at Japan’s number three electronics business has led to 10,000 firings last January, withdrawal from Europe’s PC market in 2009 and the selling of $235 million in shares of the surging Chinese computer-maker Lenovo Group to bolster plunging sales.

Terrie Lloyd an entrepreneur and business commentator living in Tokyo believes NEC will be next to fail. “I had some insider (board level) information 12 months ago that things were really serious,” he says. “My guess is that the banks have given NEC one last chance to fix their problems — they got a big loan several months ago after the markets baulked at a bond issuance — before NEC is going to have to really bite the bullet and start firing thousands.”