Osaka - Saturday, March 13, 2010

From recent reports of March 10 and 11 from Nikkei, specialized in economy/business and politics, production of electronics component and investment by non-Japanese capitals are shifting from Japan to overseas. This reflects worldwide trend of global competition getting more and more severe, and of companies focusing on business in emerging countries, attributing to expected growth in market and business opportunity of emerging countries.

In this article, how electronic component production of Japanese companies is shifting from Japan to overseas is explained.

1. How is electronic component production by Japanese companies shifting from Japan to overseas?

According to Nikkei's article issued on March 11, Japanese electronic component makers are to accelerate transfer of their production from Japan to overseas. Japan's production of electronic equipments has been drastically shifting to overseas, and already 90% of PCs and 70% of AV equipments such as TV sets have been manufactured overseas. In line with this, electronic components production of each company will be transferred to overseas with the objective of absorbing rapidly growing demand of emerging market.

Overseas Production of Electronics Component Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Transfer To / Overseas Production (Current, %) / Overseas Production (Target, %) / Timing of Achieving Target / Products
Konika Minolta Holdings / Malaysia / 67 / 81 / Oct. 2010 / Glass base material for HDD
Nippon Chemi-Con / Asia / 40 / 60 / FY* 2010 / Aluminum electrolysis condenser
Murata Manufacturing / China, Malaysia / 15 / 30 / FY* 2012 / Ceramic condenser
Fuji Electric Holdings / Malaysia / 50* / 70 / March 2010 / Electric disc for HDD
* FY = Fiscal Year
** Current overseas production of Fuji is of April - June 2009

Konika Minolta will construct a new plant in Malaysia that manufactures glass base material for HDD, investing 11 billion yen. Operation is to start in October 2010. This is because of their assumption that glass demand will steadily grow in emerging countries with promising growth of PC demand in emerging countries. Their production in Malaysia will double to 1.3 million (volume base) per month, and their overseas production will increase from current 67% to 81%.

HOYA, the global leader of glass base material for HDD is investing approximately 15 billion yen to construct their fifth plant in Philippines. The new plant is to start its operation in August 2010 and the production capacity is assumed to increase by 30% to 33 million (volume base). HOYA already manufactures all its products overseas.

Fuji Electric Holdings, a manufacturer of electric discs for HDD, will increase its production capacity of Malaysia in March 2010, to increase their overseas production from 50% to 70%. HDD makers to which Fuji Electric Holdings supply glass base materials has already located their strategic plants in Asia; for example, Toshiba in Philippines and Hitachi Global Storage Technologies in China.

Production transfer of other electronics components will also be driven. Murata Manufacturing will re-locate equipments used in Japan to China and Malaysia where their volume zone products such as condensers will be produced. As a result, their overseas production will be increased from 15% to 30%.

2. Why is electronic component production transfer ongoing?

With global competition getting more and more severe, Japanese electronic makers are shifting their production to overseas drastically. According to JEITA (Japan Electronics and Information Technology Industries Association), overseas production of AV equipments such as TV sets has reached 72% in 2009. Japanese PC makers produce approximately 90% of their PCs overseas.

It is quite logical and rationale for electronic component makers, the suppliers of electronic makers, to also shift their production to overseas. Electronic component overseas production is already 63% in 2009. It is quite possible that production shift from Japan to overseas will be further driven by high yen.

In the next article, how investment of major foreign capitals is shifting from Japan to emerging countries is explained.