Tokyo - For Japan's electronics firms, the kitchen is the final frontier.Companies from Panasonic to Toshiba are diverting engineers and money away from their TV operations and into developing "smart appliances" after losing out in the living room to cheaper Asian rivals.A fridge that texts pictures to show what's for dinner, a voice-controlled washing machine - appliances like these are being designed to talk to each other via the cloud to cut energy bills.For now, they're expensive, deterring buyers: A Japan-only Toshiba smart fridge with camera runs to about $2 800 versus less than $800 for a basic model. Yet as more products come on the market and competition cuts prices, global smart appliance sales will rocket to $35bn by 2020 from just over $600m in 2012, according to technology intelligence firm Pike Research.As the industry prepares to descend on Las Vegas next month for CES, the world's biggest tech trade fair, that's mouth-watering for all electronics makers. But none more than Japan's.NicheThey've been squeezed into billions of dollars of losses in recent years, caught between high manufacturing costs, aggressive competition from the likes of Samsung Electronics and the strong yen, making exports of consumer staples like TVs more expensive.To prosper in the new niche, Japanese companies must not only convince consumers to shell out for a whole new set of appliances, which need to be all from the same brand to guarantee compatibility. Further down the line, they'll also have to hold their own against the same cheaper Asian rivals that stole their thunder in leisure electronics."Everyone says having the same brand of goods would be more energy-efficient, but in the end it comes down to the price and function of each product," said Satomi Wakamatsu, a 41-year old housewife from Hiroshima. She owns a Hitachi fridge and washing machine, and an air conditioner made by Daikin Industries.Wakamatsu considered buying smart appliances. But she balked when she added up the cost of all-new appliances, in addition to the home energy management system (Hems) needed to connect them to each other to monitor and cut energy usage - a further $2 000 - $3 000.Sales of Japanese companies' Hems were helped over the last year by hefty government subsidies designed to stimulate energy efficiency - but they ended in October. Panasonic sold 20 000 Hems units between April and September, double its full-year target, but said it's unsure if that pace can be sustained without the subsidy.Toshiba, meanwhile, wants 20% of its appliance sales to be from "smart" goods by the end of fiscal 2014.Growth potentialThe potential growth of smart goods sales has also stimulated peers in the US and Europe, including Whirlpool, General Electric, Electrolux AB, Robert Bosch GmbH, and Indesit Company SpA.In Asia, South Korea's Samsung Electronics and LG Electronics have rolled out smart appliances and have plans to go further afield: Samsung recently showed off its line at luxury department store Harrods in London, including a fridge fitted with an LCD panel to keep track of groceries and suggest recipes."If you see the recent trends in the appliances market, made-in-Japan products are increasingly threatened by their Korean and Chinese counterparts with enhanced technologies and competitive prices," said Jamie Ko, head of consumer appliances at research firm Euromonitor.As sales of digital audiovisual gadgets have waned over recent years, many Japanese firms already make more money from traditional household appliances, mostly sold in Japan, than from consumer electronics sold globally.