Murata’s move to Thailand heralds Japan’s technological shift from China

Murata Manufacturing and other Japanese tech suppliers are reducing their dependence on China as the standoff between the United States and China deepens.

The world’s largest capacitor maker and iPhone parts supplier, Murata announced in November that it would open a new factory in Thailand in October 2023. In an interview with Nikkei Asia, Murata Chairman Norio Nakajima said that the new factory would eventually be expanded to be as big as the one in Wuxi, near Shanghai, where Murata produces multilayer ceramic capacitors for consumer electronics.

Murata, which relied on Greater China for more than half of its revenue, expects the share to decline over time as the company looks to the Indo-Pacific for future growth. It’s an example of Japan Inc trying to deal with geopolitical risks amid the US-China rivalry.

“There is a risk of events beyond our control happening,” such as Washington imposing a technology ban on China, Nakajima said. “It is imperative to diversify our supply chain.” He added that key customers such as Apple were also diversifying outside of China. Murata once symbolized the enduring economic ties between Asia’s two largest economies, but the trade divide between the United States and China has left business leaders like Nakajima nervous.

Murata is not just responding to the trade war. It also examines long-term demographic trends.

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“The most populous country today may be China, but in 2030 it will be India, and later it will be Africa,” Nakajima said. “Will these economies be aligned with China or the United States? We do not know. We should be able to respond to both scenarios.

Nakajima, who became president of Murata in June 2020, is credited with transforming the Kyoto-based company from a local electronics maker into a key supplier to Apple. He is the first business leader outside the founding Murata family.

The company provides devices for smartphones such as filters to pick up certain radio signals; amplifiers for reinforcing the signals to be transmitted; and duplexers to simultaneously handle incoming and outgoing signals. They are used in Apple iPhone, Samsung Galaxy and Huawei Mate smartphones, among others. Components are installed in smartphones in China for shipment to end markets, with the United States being the largest, according to Nakajima.

These components need to be designed differently, even if performing the same functions, to match each smartphone brand’s operating system, Nakajima said. As the trade war removed barriers to technology transfer, each brand developed its own design and operating system, which meant that parts suppliers also had to adapt their products accordingly and, in doing so, increase the burden. overall work. “It’s a difficult task,” Nakajima said.

For Murata, the US-China decoupling isn’t the only supply chain challenge. Chip shortages have hampered production by Japanese automakers, slowing demand for electronic components, he said.

Murata itself has difficulty supplying products such as power tool batteries and automotive WiFi modules, due to a shortage of power management ICs and transceiver ICs, Nakajima said. He expects the chip shortage to ease this year.

Murata isn’t the only Japanese tech company adjusting its supply chain amid geopolitical uncertainty.

Renesas Electronics, one of Japan’s leading chipmakers, fears it will be barred from supplying to China, a market that accounts for 22% of its sales, due to the trade war between the United States and China.

Norio Nakajima, President of Murata

Murata’s Nakajima believes it is necessary to diversify outside of China due to a “risk of events beyond our control”, such as Washington imposing a tech ban © Atsushi Ooka

Renesas depends on its operations in the United States for its core business of manufacturing analog semiconductors, which convert analog signals such as sound, images, motion and temperature into digital signals. The United States is the world’s center for analog semiconductor production, led by Texas Instruments and Analog Devices.

In 2021, Renesas bought British company Dialog Semiconductor for $6 billion in a bid to diversify its technology base in Europe, making it possible to supply chips to China using European technology.

Renesas CEO Hidetoshi Shibata stressed the importance of access to talent and technology in the United States and Europe. In a speech at an event hosted by SEMI, a global industry association, in December, he explained how the Tokyo-based company, created by the merger of Hitachi, Mitsubishi Electric and NEC’s semiconductor businesses in 2010 , has diversified its technology base through a series of acquisitions in the United States over the past five years, and has also filled its talent gap in Europe with the acquisition of Dialog.

“It’s the talent that matters the most,” Shibata said.

Another company that is trying to diversify its geographical footprint is Tokyo Electron, one of the world’s largest chip equipment makers.

Appearing at the SEMI event, Tokyo Electron Managing Director Toshiki Kawai outlined his company’s strategy of strengthening its leadership through closer ties with Europe’s biggest companies, amid growing challenge from Chinese chip equipment manufacturers. He highlighted the recently announced partnership with Belgian research institute Imec and Dutch company ASML, the leading manufacturer of lithography machines, to develop state-of-the-art chip manufacturing equipment.

“To develop the next-generation devices, we will promote collaboration with our customers around the world,” Kawai said.

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 major chip-producing region. It now accounts for only 10% of global production, as companies such as STMicroelectronics and Infineon outsource production to foundries such as TSMC.

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

Chip suppliers are able to benefit from the initiatives of these countries to localize their supply of semiconductors, which raises the question of their location. Tokyo Electron’s production takes place almost entirely in Japan, although more than 80% of its sales come from overseas.

“Our rivals are moving their production overseas to be closer to their customers,” a Tokyo Electron official said. This will make it easier for them to serve their customers, rather than relying on distributed supply chains around the world. “We will have to think more about where we should produce, in Japan or overseas,” the official said.

A version of this article was first published by Nikkei Asia on January 10, 2022. ©2022 Nikkei Inc. All Rights Reserved

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