Market Brief Japan Electronic Components & Semiconductor Industry 2008


• Japan, with the second largest economy in the world, remains globally competitive by a strong and dynamic electronics industry • electronic components and semiconductors are an integral part of that industry • the strong demand for digital consumer electronics and other high-end products featuring integrated chips is driving production • trends in semiconductor applications in wireless and car electronics are especially noteworthy • despite the trend among Japanese firms to outsource manufacturing to overseas production centers, semiconductors continue to be produced locally • the Japanese market for chips, as demonstrated by the phenomenon of Sony’s Playstation 3, is vibrant and healthy • also, chip applications in car electronics for Japan are also on an upward trend • local production in Japan for high-quality items is remaiinng high


Market Overview
• according JEITA, global production in the electronics and IT industries was forecasted to increase to 243 trillion yen ($2.4 trillion) in 2008 • Japanese companies are expected to account for one-fifth of this production • as worldwide demand for digital products grows, the demand worldwide for electronic components and semiconductors will also continue to increase • global rates for Japanese made semiconductors and electronic components in consumer electronic products are 77% and 38%, respectively • currently in Japan, with consumer electronic equipment going “digital” and increasingly featuring more sophisticated functions, the local demand for components and chips likewise keeps growing • this is especially true for wireless equipment – such as cell phones, smart phones, and wireless LAN – and wireless technologies – such as WiMAX and ZigBee. • also, chip applications in car electronics for Japan are also on an upward trend • local production in Japan is not shrinking  while the trend may be for manufacturing economies to outsource production (Japan included), in Japan’s electronics industry, where higher-end products require product reliability and close quality control, semiconductors for those products continue to be manufactured in Japan (as opposed to lower-end general materials which tend to be manufactured close to the overseas production centers) • as Japanese consumer electronics manufacturers and telecommunications equipment manufacturers move production (assembly) overseas, such as to China, components shipped to those production lines count as “exports” from Japan • Japanese market and demand for chips is quite healthy (see Chart 1) • according to JEITA, domestic production of semiconductors and electronic components in Japan will continue to increase in the future, with an expected growth rate of 5% in 2009.


Market Size


Domestic Production

The production of liquid crystal devices (LCDs) is still growing. With the Olympic Games in Beijing, demand for LCD TVs was very strong in 2008. Because of this growth, consumers can benefit from the economies of scale and the resulting lower prices. Japanese TV manufacturers, through internal improvement in efficiencies and lowering of production costs, are financially stable and are generating profits despite the lowering retail prices.


Key Suppliers


Market Prospects & Entry
Prospective Buyers Consumer electronics and telecommunication industries are the top prospective buyers in Japan. More recently, the automotive industry is proving to be a fast-growing prospective market.

Market Entry To enter into the Japanese market, foreign suppliers are encouraged to consider the following:  Product Localization/Customization is essential to capture the Japanese market  Recently, Japanese distributors tend to prefer multi-distributor systems, as opposed to exclusive contracts. Many distributors have specializations, segmented by technology or geographic region
Japanese domestic production of car electronics products (2001 to 2012; millions of units; orange = collision avoidance related, light blue = collision safety related, pink = vehicle interior control related, darker blue = driving related, green = engine control related) Source: Yano Research


Market Prospects
Next generation wireless technologies, such as WiMAX and ZigBee, are major areas for growth and the Japanese mobile industry is actively seeking innovative hardware and software applications for these technologies. One Segment Broadcasting (known as "One Seg") is a new type of digital terrestrial broadcasting for mobile phones and car navigation systems. It was launched in Japan in April 2006. One Seg allows users to view TV programming in high definition over their phones or in their cars. According to the Fuji Chimera Research Institute, components related to One Seg applications will reach a market level of $400 million by 2011. Components for fuel batteries are also showing tremendous growth. According to JETRO, the Japanese fuel battery market will reach $900 million by 2010, up from $280 million in 2007.

Components for car electronics also offer opportunities, especially in the following applications: • Electronic Stability Control Systems – In Japan, the percentage of cars with electronic stability control systems is only 10%, whereas in the United States, all cars sold after September 2011 will come with these systems installed, Japan is expected to follow this trend • Adaptive Front Lighting Systems (AFS) – Given the Japan’s narrow and complex roads, AFS is a useful application for the Japanese market • Night Vision Systems – Globally, the number of cars with night vision systems in 2007 was only 270,000. This number is expected to increase, however, to 3,700,000 by 2010, according to the Press Journal. As with AFS, it will be especially popular in Japan • Portable TV Modules – The number of cars with portable TV modules was 255,000 in 2007 but will increase to 4,620,000 by 2010, according to the Press Journal • Other useful applications: Cruise Control Systems and Display Monitors


Few key points in regards to Japanese customers
• Extreme focus on quality and on customer service (you will find the biggest claim rate worldwide in Japan)

• Need to show long term committement to Japan
• Excellent distribution and service network a must • Some adaption to the Japanese market often required • Extreme need and request for technical information and documentation • Close and frequent communication to partner and customers necessary to maintain well-working longterm relations • Focus hard on hiring top people (a pool of very talented Japanese are available if you screen carefully). Use recruiting agencies and headhunters rather than printed or internet ads • OK to take a premium price still, although the market is becoming more competitive


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