Nikkei: Murata plans to build a factory in Thailand. Are Japanese semiconductor companies "escaping" from China?

According to Nikkei Asia, Murata Studio (Murata Manufacturing) and other Japanese technology suppliers are reducing their dependence on China because of competition between China and the United States.

Murata, the world's largest capacitor manufacturer and iPhone parts supplier, said in November that it would open a new factory in Thailand in October. Its president, Norio Nakajima, said in an interview with Nikkei Asia that the new plant would eventually be as big as Murata's plant in Wuxi, which makes multilayer ceramic capacitors for consumer electronics.

More than half of Murata's revenue comes from Greater China, and that share is expected to decline over time as the company seeks future growth in the Indo-Pacific region. This is an example of how Japanese companies are trying to deal with geopolitical risks in competition between China and the United States.

"there is a risk of events beyond our control and our supply chain has to be diversified," Nakajima said, adding that major customers such as Apple are also diversifying from China. Murata used to symbolize the lasting economic ties between Asia's two largest economies, but the trade rift between the United States and China has made business leaders like Nakajima nervous.

Murata is not just dealing with a trade war, he is also studying long-term demographic trends.

"the most populous country today may be China, but by 2030 it will be India, and in the future it will be Africa," Nakajima said. "will these economies form alliances with China or the United States? We don't know. We need to be able to deal with these situations. "

Nakajima, who became president in June 2020, was praised for transforming the Kyoto-based company from a local electronics manufacturer to a major Apple supplier. He is the first company leader outside the Murata family, the founder of the company.

Murata provides smartphone devices, such as filters to receive some radio signals, amplifiers to enhance transmitted signals, and Duplexers to process both input and output signals. These devices are used in smartphones such as Apple, Samsung and Huawei. Nakajima said the components were installed in smartphones in China and then shipped to the final market, with the US being the most important market.

Nakajima explained that even if they perform the same functions, these components need to be designed differently to match each smartphone brand's operating system. As the trade war poses obstacles to technology transfer, each brand has developed its own design and operating system, which means that component suppliers must also customize their products accordingly, increasing the overall workload. "it's a daunting task," Nakajima said.

For Murata, decoupling between China and the US is not the only supply chain challenge. Chip shortages have hampered production by Japanese automakers and slowed demand for electronic components, Nakajima said.

Nakajima said Murata itself was struggling to supply products such as power tool batteries and car Wi-Fi modules because of a shortage of power management and transceiver ICs. Nakajima expects the chip shortage to ease this year.

Murata is not the only Japanese high-tech company to adjust its supply chain amid geopolitical uncertainty.

Renesa, Japan's top chipmaker, is worried that it may be banned from supplying goods to the Chinese market, which accounts for 22 per cent of its sales, because of a trade war between China and the US.

Renesas relies on its US operations to produce analog chips that convert analog signals such as sound, image, motion and temperature into digital signals. The United States is the global analog semiconductor production center, in which Texas Instruments and ADI occupy a leading position.

In 2021, Renesas bought UK-based Dialog Semiconductor, for $6 billion in an attempt to diversify its technology base into Europe, making it possible to use European technology to supply chips to China.

Renesas Electronic CEO Hidetoshi Shibata stresses the importance of acquiring talent and technology in the United States and Europe. In a speech at an industry event hosted by SEMI, a global industry association, in December, he explained how the Tokyo-based company had diversified its technology base through a series of acquisitions in the United States over the past five years, and that it had filled its talent gap in Europe with the acquisition of Dialog.

"Talent is the most important," says Shibata.

Tokyo Electronics (Tokyo Electron) is one of the world's largest chip equipment manufacturers and another company competing to diversify geographically.

Tokyo Electronics CEO Toshiki Kawai attended the SEMI event and outlined its strategy to strengthen its leadership position through close ties with top European companies while competing with Chinese chip equipment manufacturers. He highlighted the recent announcement of a partnership with Imec, a Belgian research institute, and ASML, a leading Dutch manufacturer of lithography machines, to develop cutting-edge chip manufacturing equipment.

"in order to develop next-generation devices, we will promote cooperation with customers around the world," Kawai said.

Like the US, China and Japan, Europe is now trying to increase local chip production.

Europe used to be a major chip producer. Europe now accounts for only 10 per cent of global production, as companies such as St and Infineon subcontract production to contract factories such as TSMC.

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

Chip equipment makers can benefit from localised semiconductor supplies in these countries, raising questions about where they should open stores. Tokyo Electronics makes almost all of its production in Japan, although more than 80% of its sales come from overseas.

"our competitors are moving production overseas to get closer to their customers," said an official at Tokyo Electronics. "We will have to think more seriously about whether we should produce in Japan or overseas," the official said. "