TOKYO -- A tantalizing No Entry sign guards the door to the Sony Corp.'s design center, the heart of the consumer electronics empire that has brought the world the Walkman, the Trinitron television set and the compact disc -- all products that people never even knew they wanted until Sony invented them. Each of the company's creations comes out of this center, where it is given the sleek, curved, European styling that distinguishes it as a Sony. Inside, in a corner room, a few intense-looking computer jocks peer at video screens displaying diagrams of stereo speakers. The rest of the design center has the gray industrial-carpeted and modular look of a hip architectural firm; any secrets in progress have either been put away for the day or are invisible to the average eye. The one amazing thing is the people. In a city where millions of worker bees get on the subways each morning dressed in nearly identical blue suits and white shirts, here the woman receptionist is in blue jeans, and the designers themselves, almost all men in their early thirties, wear plaid shirts and Reeboks. The look is cool, low-key, vaguely arrogant.

One of the current stars here is a 33-year-old workaholic, an art director, who leaves his wife and son at his apartment every day at 7:30 a.m. and doesn't return until 11 p.m. Slim and stylish, smiling tentatively from behind a pair of dark green horned-rimmed glasses, he is shy enough to be mortified by interviews, but certain enough of his talents to know that he never wanted to design such unglamorous "white goods" as refrigerators and rice cookers. He was also brash enough to have quit his first job at Japan Victor Co., Sony's arch-rival. (In a country where lifetime company employment is still the ideal, jumps to competitors have the smell of scandal.) His name is Yuji Morimiya, and he is the virtually anonymous designer of the palm-sized video camera called the Sony Handycam -- the company's biggest hit since the Walkman.

It was Morimiya who drew the first sketches of the Handycam after the orders came down from Sony's top management to shrink, at whatever cost, the company's clunky old video cameras, and it was Morimiya's designs that made Sony engineers incredulous at the thought of bringing them to life. "Common sense told them it was impossible," says Takashi Kono, a Sony general manager and the chief engineer behind the Handycam project.

And yet, through a uniquely Japanese combination of all-out company mobilization, microchip technology, a willingness to spend huge sums of money without immediate results and, perhaps most important, uncynical devotion to the company, Sony got its invention on the market in record time, and a full year ahead of its competition. Today, 18 months later, 1 million Handycams have been sold worldwide, and second- and third-generation models are now on the market. They are one of the hottest Christmas presents this year. Selling for between $800 and $1,300, the little video camera is a major moneymaker for Sony -- and a big helper in paying for the company's $5 billion purchase of Columbia Pictures last year.

If there is a front line in the trade war between America and Japan, the inventors at Sony, like a new class of samurai, are on it. The story of Yuji Morimiya, Takashi Kono and the people at Sony who built the Handycam is that of a cadre largely unknown outside the company. But on another level, it is the story of how Japan wiped out the consumer electronics industry in the United States.

Setting the Goal Takashi Kono is sunk comfortably this afternoon in a deep leather chair in a Sony meeting room, in a building not far from the company's high-tech but non-lavish world headquarters, trying to placate a secretary who calls periodically to fuss that he is late for a meeting. Kono is a classic company man whose two-hour, one-way commute keeps him from home every day from 6:30 a.m. to past midnight. "I am a Napoleon," he says, laughing. Now he seems to enjoy taking the time to recount the Handycam war stories. He is 48, cheerful and loose, and wears a Gucci tie that he bought on a recent trip to Milan. On his shirt is a small Handycam pin. "It was a gift from the Sony dealers in Spain," he says, grinning.

The story begins, Kono says, in 1986, when Sony was casting about for a new product to liven up its desultory video line. The existing video cameras with sound recording ability made by Sony and its competitors (the industry calls them camcorders) were obtrusive nuisances that had to be balanced on the user's shoulder, making the few tourists who lugged them on vacation look like pack mules. Sony discovered that the only people willing to put up with the inconvenience of the old video cameras were yuppie parents eager to record every new gurgle from their babies. Beyond that, virtually no one else was buying them.

Sony needed a hit. Although the Walkman had been a runaway success, by the mid-1980s the company was bloodied by the VHS-Betamax disaster. In 1975, Sony had introduced the Betamax, the first videocassette recorder for home use, and expected its competitors to adopt the system as the industry standard. But 18 months later, Japan Victor Co., or JVC, a subsidiary of Matsushita Electronics Corp., introduced its VHS system, which had a crucial advantage over Sony. It could play two-hour tapes, suitable for movies. Sony belatedly introduced its own two-hour Betamax tape, but by the early 1980s the major Japanese electronics companies ganged up against Sony and lined up behind JVC, saturating the market with VHS machines and tapes. Sony lost so much money on Betamax that it dipped into the red at the operating level, eventually admitting defeat when it began making VHS machines too. But the intense bitterness toward JVC lingered, and was at least a factor, some Tokyo securities analysts say, in the development of the Handycam. "They wanted something they could kick JVC's shins with," says Darrel Whitten, a vice president of Prudential-Bache Securities in Tokyo and a longtime analyst of the consumer electronics industry.

It was in this environment that Minoru Morio, a Sony senior manager, summoned Kono, one of his finest engineers, and ordered him to shrink Sony's existing video camera down to a machine that could fit in the palm of one hand. Japan is celebrated for its "consensus-building" style of Japanese management that theoretically includes large numbers of people in all decision making; in truth, at Sony and many other Japanese companies, the "consensus" is usually set from above. "Sony is a company where top management is always trying to realize their dreams -- the working is on our side," says Kono, chortling. In this case, the "consensus" was that Sony needed a smaller, handier product, with the same high quality of the larger models, to inject some excitement into the lackluster video camera market. Morio set an 18-month deadline.

"I told him flatly that I couldn't do it," Kono recalls. "First of all, what he wanted was one-fourth the size of what we had already designed. You could possibly make it half the size; that was still a challenge. But a one-quarter reduction takes time, and to be given a target date a year and a half away was not technically forseeable."

And yet, Kono was well aware that miniaturization had always been Sony's great genius. Other companies may make better audio equipment -- Sony President Norio Ohga, a former opera singer and a devoted audiophile, uses European-made speakers at home -- but nobody shrinks better than Sony. Kono knew he had to try. "It's the Sony spirit," he says. "We couldn't say, 'We cannot do it.' "

So by the end of 1986, Sony began what eventually was code-named in-house as the secret "55" or "Go-Go" project. (The number 5 is pronounced "go" in Japanese; the new video camera was supposed to appeal to young people on the go.) The camera would use 8mm videotape cassettes, first introduced by Sony in 1985, which are smaller than ordinary audio tapes and are now used in such Sony products as the Video Walkman, a combination color television and VCR shrunk to the size of a small book. Kono, still thinking it was hopeless, superstitiously set his target date for the second Monday in August a year and a half later: 8888.

The task before him was to shrink every part in the existing camcorder, 2,200 parts in all, by one-half to one-fourth. That was hard enough. More crucially, his engineering team had to develop a new mechanism to drive the videotape through the machine. This was to be the centerpiece of Sony's innovation.

In a standard tape recorder, a stationary "pick-up head" reads the magnetic impulses on the tape and translates them into sound. In videotape recorders, the head has to pick up a lot more information -- images as well as sound. Videotape passes around one side of a fast-spinning "drum" that contains on its outer surface two "video heads" that read the tape as they themselves spin at a slight angle to the direction of the tape. It all works like a micro solar system.

In Sony's new video camera, the spinning drum had to be shrunk. To maintain the quality of the image, Sony engineers first wrapped the tape around the drum 292 degrees instead of the normal 190, so the same amount of tape could touch the drum as before. Then Sony added two more spinning video heads on the drum to read the tape.

These were significant but not startling innovations. The real breakthrough was to make sure that the tape ran along the drum at exactly the correct angle and speed, requiring a motor mechanism of exquisite precision. "It was like splitting a hair a hundred times to describe how accurately the tape had to run across the rotating head drum," Kono says.

Sony's other innovation was to densely pack the Handycam's circuit boards with microchips and even the mechanical moving parts of the camera, a feat in part accomplished because Sony was able to order the parts from its own factories. The company also went to 120 outside parts manufacturers, and in great secrecy brought them in on the deal. Much sake was consumed over long business dinners to cement relationships. "The important thing was to bring them in on the dream," says Kono.

Heating Pad to Handycam Americans may think of Sony as the ultimate Japanese company, but Tokyo's conservative business establishment views the electronics maker as a roguish upstart. Unlike Mitsubishi, Mitsui or the other century-old industrial cartels that built modern Japan, Sony rose humbly out of the wreckage of postwar Tokyo.

In 1946, two young engineers who had met in the Navy founded, with $500 between them, a company that made heating pads. The older one, Masaru Ibuka, was a well-connected businessman; Akio Morita was the eldest son of a rich sake-brewing family. They named the company Tokyo Tsushin Kogyo, or Tokyo Telecommunications Engineering Co., and worked out of a dilapidated building on the southern edge of the city. They bought a Datsun truck for $100, and did the delivery runs themselves, dodging the occasional donkey cart, on the smoky, chaotic streets of American-occupied Tokyo. The company frequently had to be bailed out by Morita's father. Only later did they change the company name to Sony, derived from the American-sounding "sonny boy" and sonus, the Latin word for sound.

The name was also attractive because it did not identify them with Japan at a time when the country was known in the United States as little more than the producer of cheap trinkets and paper umbrellas. "In choosing our name we did not purposely try to hide our national identity," Morita writes in his book, "Made in Japan," "but we certainly did not want to emphasize it and run the risk of being rejected before we could demonstrate the quality of our products. But I must confess that in the early days we printed the line 'Made in Japan' as small as possible, once too small for U.S. Customs, which made us make it bigger on one product."

In 1950, the company brought out Japan's first tape recorder, a bulky and expensive box that it struggled to sell to people who saw no need for it. Sony's real break came in 1954, when the two founders paid $25,000 for the patent rights for the transistor, a compact electronic device invented at Bell Labs in the United States that could control current flow without the need for the big, expensive and fragile vacuum tubes that were in all radios before the 1960s. Its manufacturer, Western Electric, was producing the transistor only for hearing aids, but Ibuka and Morita adapted the tiny device to create, in 1955, Japan's first tubeless radio.

Two years later, in its first success at the kind of miniaturization that would make the company famous, Sony shrank the parts to launch the world's smallest transistor radio. Marketed as "pocketable," the invention was actually a bit bigger than a standard men's shirt pocket. Sony, which never said which pocket it had in mind, was still so enamored of the idea of a salesman who could demonstrate the handiness of the radio by dropping it into a shirt pocket that the company had special shirts made for its sales force with pockets that were slightly larger than normal. The radio was an immediate hit and Sony was on its way.

In 1968, the company launched the Trinitron, a color television set with a sharper and brighter image than anything available at the time. A decade later, the company more or less stumbled onto its most famous product, the Walkman, which was born of a failed invention.

In the late 1970s, an electronics engineer named Mitsuro Ida and a group of his Sony colleagues had built a small, portable tape recorder called the Pressman, which was popular among journalists. Their next goal, according to the book "Breakthroughs," a study of innovation in various industries, was to build a portable tape recorder with stereo sound. But after they fit the stereo circuits into the small Pressman chassis, they discovered there was no room left for the recording mechanism. Ida and his coworkers had just invented a stereophonic tape recorder that couldn't record.

Instead of junking their failure, the engineers used it to play tape cassettes while they worked. One day, Masaru Ibuka, Sony's honorary chairman, stopped by and admired the sound -- and remembered that elsewhere in the building an engineer was trying to develop lightweight portable headphones. What if, Ibuka asked, you added headphones to the failed tape recorder? Wouldn't that improve the quality of the sound? The engineers thought Ibuka had lost his mind. Who would want to buy a tape recorder that couldn't record? Ibuka went to Morita, his chairman and partner for more than 30 years, and suggested they at least try listening to the sound. What they heard, of course, was stupendous. The Walkman, which displayed little of the technical brilliance for which Sony was famous, was launched, with apprehension, in 1979. More than 60 million have now been sold worldwide.

Today, the company still likes to think of itself as the little outsider battling behemoths like Matsushita, the conservative Japanese company that recently bought MCA in Hollywood and makes Panasonic, National and Technics. To a degree, Sony's fighting underdog image in Japan is true -- its sales of $18.3 billion last year were half of Matsushita's -- yet it is growing at a rate of about 35 percent a year, compared with 10 percent for Matsushita. In audio, video and television sales, Sony and Matsushita are neck and neck.

The 'Go-Go' Team In January 1988, while Takashi Kono was busy overseeing the shrinking of the thousands of parts that would go into the Handycam, Yuji Morimiya received a stunning request from his boss. A team of engineers working on a tiny new video camera needed a designer, and Morimiya, his boss told him, would do the first drawings. "I thought it was going to be very difficult," Morimiya recalls. "But I thought, 'I came to Sony just for this chance.' "

Morimiya was a clever choice for the job. At the age of 31, he had worked only 18 months in the design center's personal video group, but he had spent the five years before that at JVC, where he had designed the GR-C7, the smallest camcorder then on the market. After Morimiya finished the GR-C7, he moved to Sony in 1986 -- the same year that Sony began its own project to develop the much smaller Handycam. Sony, unlike other Japanese companies, aggressively raids competitors, but Morimiya claims he got the job by answering an ad in a newspaper.

The video camera Morimiya had to design at Sony was a much bigger challenge than the GR-C7. Armed with the specifications and a simple hand sketch of the camera on graph paper that he had been given by one of the engineers, Morimiya set to work. In the next three months, he fed the specifications into an IBM computer, which spewed back on its display screen blueprint-like drawings of possible video cameras. By March, he made hand drawings on paper, using color pencil and Magic Marker, and built a squat but sleek model -- the R-55 -- out of Styrofoam. Later, when the camera was on the market, Morimiya's old coworkers at JVC knew immediately who had designed it. "I could tell it was Morimiya's from the curve of the machine," says Shunichi Aoki, Morimiya's old boss. "Morimiya was very good at curves."

Back at Sony, the engineers were less enamored. The curves may have been beautiful, but many of them thought the camera was so small that it would melt from the heat given off by its own circuitry. Kono rallied them. "Somebody had to say -- it can be done," he says. "I felt it was my responsibility to stick with it."

Serious problems still remained. Usually, at the design stage of a Sony product, 95 percent of the necessary parts have been finalized. But with the Handycam, Sony only had 65 percent of the parts; the others simply didn't exist. And the deadline was less than eight months away.

The design, for example, called for a small built-in microphone "but the mike was only in the development stages in the research lab, and we didn't even know if it would work," says Takashi Masuda, the Sony engineer who became leader of the 20-person "Go-Go" team in January 1988. "If the mike failed, it would wipe out the project." Masuda decided to go ahead anyway. "It was a big risk," he says.

Meanwhile, a major debate evolved between Morimiya and the engineers over the position of the 8mm tape cassette. Morimiya had designed the camera with the cassette on the right, under a small cover piece, so that the user's hand curved around it. The engineers thought that was awkward, and complained that the cover piece added unnecessary weight. Masuda, the team leader, tested their arguments by carrying the camera around with him for a week, at home, at the office, on the train. After virtually living with it 24 hours a day, he decreed that the tape would be on the right. Morimiya had won.

By June of 1988, the microphone was working and engineers were building new machines to make the circuit boards. Kono selected a Sony factory near Nagoya, southwest of Tokyo, to assemble the Handycam. By now, he knew it was impossible to meet the 18-month deadline, and Aug. 8, 1988, came and went. Kono did manage to present Morio with a camcorder he and the other engineers had been developing at the same time, which was half the size of the existing cameras.

"He was not happy," says Kono. The orders came again, from Morio and also Sony President Ohga, to shrink. Holding a small company datebook, Ohga declared: "I want it this size."

Kono was then ordered to move to Nagoya to oversee the robots on the Handycam assembly line, leaving his wife and three sons in Tokyo. He took a one-bedroom apartment seven minutes from the factory, where he worked from 8 a.m. to 10 p.m. daily, and once a week worked all night.

Back in Tokyo, Sony was gearing up for the Handycam advertising campaign. Katsuya Nakagawa, an assistant manager in product planning, had started by looking around for market research, only to discover there was nothing available to answer the question of whether people even wanted a smaller video camera. At this point, another company might have ordered up an expensive survey, but Sony's management has always preferred to ignore market research, arguing it is impossible to gauge public opinion about products that don't exist.

So Nakagawa charged ahead. "We knew we wanted to change the camcorder market," he says. "We wanted to expand beyond parents and families." A magazine ad for one of the larger Sony camcorders had featured the former tennis star Jimmy Connors with his wife and two children. Nakagawa decided to junk that approach and concentrate instead on the hordes of affluent Japanese professionals in their twenties who have been taking vacations overseas in record numbers. "We decided to focus on the idea that you could use the camcorder while traveling," Nakagawa says. The Handycam was still referred to in-house as the R-55, so Nakagawa added a T, to make it TR-55, for travel. Masuda, who is 40, briefly resisted Nakagawa's idea, saying that the "TR" would remind people of the outdated transistor. Nakagawa, who is 30, retorted that nobody remembered the transistor and that Masuda was thinking like an old man.

By June of 1989, the Handycam was in stores in Japan, and by that fall it was available in the United States. Sony promoted the Handycam as "passport-sized" (it meant the Japanese passport, which is bigger than the American), and launched an advertising campaign with commercials featuring Atsuko Asano, one of Japan's most popular television actresses, using the Handycam while on a jet plane.

After the Handycam Not long ago, when Yuji Morimiya went to see his 4-year-old son in a special sports day at school, he noticed that the father of one of his son's friends had brought along a Handycam. Morimiya watched the father use it, but didn't say a word. In fact, Morimiya sees people all over Japan using the camera, and while it must give him a voyeuristic thrill, he says he often feels more worry than elation. In the same way that a cook knows exactly where corners have been cut and substitutions made in a recipe, Morimiya watches people use the Handycam and frets about its imperfections. "There is no perfect product, or perfect design," he says.

Morimiya's life has changed, although not as much as at an American company where he might have been made a superstar. Sony is after all still a Japanese company that promotes the ideal of teamwork over individual effort. After the success of the Handycam, Morimiya's reward was a promotion to art director and a raise, he says, of "a little more" than the $55,000 annual salary paid for his experience level.

Takashi Kono, the Handycam engineer, was also promoted, and admits that he is probably better paid than his peers. But for him, the real rewards are intangible. "It's not an easy job," he says. "I recognize I could spend more time with my family. Americans say that work is part of their life and family enjoyment is another part of life. However, I happen to find a certain fulfillment in what I do. My sons respect me for what I have done. When I see the Handycam commercial, I can tell my sons that their father's contributions are all realized in that product."