Murata’s Thailand move heralds Japan tech shift from China

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Murata and other Japanese technology suppliers are reducing their dependence on China as the US-China standoffs deepen.

Murata Manufacturing Co., Ltd., the world’s largest capacitor manufacturer and iPhone parts supplier, announced in November that it will open a new factory in Thailand in October 2023. Murata said in an interview with Nikkei Asia that the new factory will eventually be as large as the one in the samurai near Shanghai where Murata manufactures multi-layer ceramic capacitors for home appliances.

Murata, which has relied on Greater China for more than half of its revenues, expects future growth in the Indo-Pacific and expects its market share to decline over time. This is an example of Japan Inc trying to address geopolitical risks in the US-China competition.

“There is a risk of uncontrollable events,” said Nakajima, such as Washington imposing a technology ban on China. “It’s imperative to diversify our supply chain,” he added, adding that major customers like Apple are also diversifying away from China. Mr Murata once symbolized a lasting economic relationship between the two largest economies in Asia, but the US-China trade rift strained business leaders like Nakajima.

Murata is not only responding to the trade war. We are also looking at long-term demographic trends.

This article is from Nikkei Asia, A global publication with a unique Asian perspective on politics, economics, business and international affairs. Our own correspondents and external commentators from around the world share their views on Asia, and the Asia300 section details the 300 largest and fastest-growing listed companies from 11 countries other than Japan. increase.

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“China may be the most populous country today, but in 2030 it will be India, and even Africa ahead,” Nakajima said. “Will these economies work with China and the United States? I don’t know. We should be able to handle both scenarios.”

Mr. Nakajima, who became president of Murata Manufacturing Co., Ltd. in June 2020, is said to have changed the Kyoto-based company from a local electronics manufacturer to a major Apple supplier. He is the first company leader from outside the founder Murata family.

The company offers smartphone devices such as filters to receive some wireless signals. Amplifier to enhance the signal for transmission. Duplexer for processing incoming and outgoing signals at the same time. These are used in Apple iPhones, Samsung Galaxy, Huawei Mate smartphones and more. According to Nakajima, the components are attached to Chinese smartphones for shipping to the final market, with the United States being the most important.

Nakajima says these components need to be designed differently for each smartphone brand’s operating system, even if they perform the same function. As the trade war raised barriers to technology transfer, brands developed their own designs and operating systems. This meant that parts suppliers had to adjust their products accordingly, increasing the overall workload in the process. “It’s a difficult job,” Nakajima said.

For Murata, supply chain issues are not limited to US-China decoupling. He said a shortage of chips has hindered Japanese automakers’ production and slowed demand for electronic components.

Mr. Nakajima himself said that it is difficult to supply products such as batteries for power tools and WiFi modules for automobiles due to the lack of power management integrated circuits and transceiver integrated circuits. He expects the chip shortage to ease this year.

Murata Manufacturing is not the only Japanese high-tech company adjusting its supply chain in the face of geopolitical uncertainty.

Japan’s top chip maker Renesas Electronics is concerned that the US-China trade war could ban supply to China, which accounts for 22% of sales.

Norio Nakajima, President of Murata Manufacturing Co., Ltd.

Mr. Nakajima of Murata Manufacturing Co., Ltd. believes that it is necessary to diversify away from China due to “risk of uncontrollable events” such as Washington imposing a technology ban.

Renesas relies on its business in the United States to manufacture analog semiconductors that convert analog signals such as sound, images, motion, and temperature into digital signals. The United States is the global center for analog semiconductor manufacturing, led by Texas Instruments and Analog Devices.

In 2021, Renesas acquired the UK-based Dialog Semiconductor for $ 6 billion, diversifying its technology base to Europe and enabling it to use European technology to supply chips to China.

Hidetoshi Shibata, Chief Executive Officer of Renesas, emphasized the importance of talent and access to technology in the United States and Europe. In a speech held in December at an industry event hosted by SEMI, a global industry group, a Tokyo-based company established in 2010 by the merger of Hitachi, Mitsubishi Electric, and NEC’s semiconductor businesses The series of US acquisitions over the last five years, as well as the acquisition of Dialog, have closed the talent gap in Europe.

“The most important thing is talent,” Shibata said.

Tokyo Electron, one of the world’s largest chip equipment manufacturers, is another company competing to diversify its geographic footprint.

Tokyo Electron CEO Kawaito Shiki will be performing at a SEMI event and will strengthen his leadership through close relationships with top European companies in the midst of tough challenges from Chinese chip makers. Strategy was launched. He emphasized the recently announced partnership between the Belgian research institute IMEC and ASML, a leading Dutch lithography machine manufacturer, to develop state-of-the-art chip manufacturing equipment.

“We encourage collaboration with customers around the world to develop next-generation devices,” says Kawai.

Like the United States, China and Japan, Europe is now trying to increase local chip production to minimize the risk of supply disruptions amid tensions between China and Taiwan.

Europe was once a large chip-producing region. Companies such as STMicroelectronics and Infineon outsource production to foundries such as TSMC, which now accounts for only 10% of global production.

Europe wants to increase its global market share to at least 20% by 2030.

Chip equipment manufacturers are in a position to benefit from the moves of these countries to localize their semiconductor supply, which raises the question of where they should build their stores. Production at Tokyo Electron is almost entirely in Japan, even though more than 80% of sales come from overseas.

An official at Tokyo Electron said, “Rivals are shifting production overseas to bring them closer to their customers.” This makes it easier to serve customers rather than from a global supply chain. “We have to think more about where to produce, both in Japan and abroad,” officials said.

Version of this article First published by Nikkei Asia on January 10, 2022. © 2022 Nikkei Co., Ltd. All rights reserved.

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