Shrugging off China slowdown: Japan electronic parts makers cash in on new iPhones

Shrugging off China slowdown: Japan electronic parts makers cash in on new iPhones

TOKYO — Japanese electronic component makers are benefiting from the release of U.S. gadget maker Apple’s new-model iPhones.

     They remain bullish despite China’s economic slowdown because the total value of parts crammed into smartphones is rising. And in China, handsets must be compatible with multiple communications standards. That means more pricey electronics per phone.

     Orders for smartphone parts are pouring into Murata Manufacturing, and Executive Deputy President Yoshitaka Fujita emphasizes production and sales are proceeding as planned. “I don’t think China’s smartphone market has changed dramatically,” Fujita said.

     The electronic components market is growing worldwide. The value of Japanese electronic component makers’ global shipments jumped 12.8% on the year to 332.4 billion yen ($2.74 billion) in June, rising for the 28th month in a row, according to the Japan Electronics and Information Technology Industries Association, a trade group.

     Manufacturers began mass production of parts for Apple’s new iPhone 6s/6s Plus series in August. “Orders for smartphone parts will remain strong in the October-December quarter,” said TDK President and CEO Takehiro Kamigama.

     Parts makers are boosting their production capacity for smartphone components. Nidec‘s haptic devices appear to have been adopted for the iPhone’s new touch-sensitive features. Nidec is switching some of its facilities devoted to making precision compact motors for hard-disk drives to smartphone parts to keep up with demand.

     Alps Electric in October plans to spend 10 billion yen to increase output of camera actuators and other smartphone parts. Taiyo Yuden plans to increase capacity for laminated ceramic capacitors by 10% compared with the previous year, and for high-performance inductors by 50% by the end of fiscal 2015.

Making hay

Despite the relatively bright outlook, growth in China’s smartphone market is expected to slow due to a weaker economy and the fact that many people who want smartphones in China already have them. It is uncertain how long booming parts production will last. Manufacturers are looking for new sources of revenue as growth in the smartphone market slows in emerging economies.

     TDK will set up a joint venture with Advanced Semiconductor Engineering, a big Taiwanese integrated-circuit packaging and testing company, to boost its output capacity for IC embedded substrates used in smartphones and wearable devices. Hitachi Maxell, which makes lithium-ion power cells, is “developing batteries for wearable devices, which require smaller, more reliable batteries — because prices for smartphone batteries could decline,” said Yoshihiro Senzai, the company’s president.

     Meanwhile, prices for memory chips and liquid crystal display panels are falling. Toshiba has seen its operating profit margin for NAND flash memory chips fall from the upper 20% range in the fiscal year ended March, to just over 20% in the April-June quarter of this year.

     Sharp President Kozo Takahashi called sales of his company’s LCD panels to China “weaker than expected.” The number of memory chips and LCD panels needed to make a smartphone, unlike that for other parts, remains the same.

 (Nikkei)

Shrugging off China slowdown: Japan electronic parts makers cash in on new iPhones