December 12 (UPI) — Some of Japan’s lesser-known material suppliers will benefit as Huawei and Beijing make big bets on 5G, according tomedia reports. One day in late November, a dozen Japanese businessmen in black suits gathered in Tokyo to hear Huawei executives talk about a new, lucrative industry: 5G. Liang Hua, Huawei’s chairman, told them how fast China was deploying a lightning-fast 5G network, far ahead of schedule, and how big the business opportunities were.
In front of executives and researchers from companies and universities such as Fujifilm, Sony and Mitsubishi Heavy Industries, Mr. Liang threw out a series of eye-popping numbers and promised to “work with Japan to further develop our supply chain”.
China will overtake the United States in the 5G market and will benefit from Japan. Japanese suppliers, in turn, will seize an unexpected opportunity in the U.S.-China competition.
Huawei has steadily shifted its procurement efforts elsewhere, and Japan has benefited. Mr Leung said Huawei had invested y780bn ($7.2bn) in Japan between January and September , 60bn more than last year , and hinted that more investment would be made in the future .
Japanese suppliers, for their part, are ramping up production in preparation for the upcoming 5G boom. Many of them are obscure companies, but the materials and components they provide are essential to big brands such as Huawei.
Tokuyama is one of them. Founded in 1918, the company controls 75% of the world’s high-purity aluminum nitride market. Aluminum nitride is an important part of the thermal material used to prevent semiconductors from overheating. It is expanding one of its main plants in southern Japan in the hope of increasing capacity by 40 per cent by April next year.
Yoshiyuki Yamamoto, general manager of Deshan, is counting on a surge in demand, especially from data centers. “5G will increase data consumption,” he said. “
In fact, he thinks 5G is just the beginning of a bigger order boom. After all, everything from cars to air conditioners will be equipped with chips to support networking. According to the Semiconductor Industry Association, global semiconductor sales reached $106.7 billion in the third quarter of 2019, up 8.2% from the previous quarter.
Furuya Metal is another niche supplier in Japan. Ninety percent of the world’s palladium compounds are produced by the company, and the phosphorous materials for OLED (organic light-emitting diode) displays produced by Beijing Oriental, Samsung Electronics of South Korea and LG Electronics are not short of such materials.
Mainstream smartphone makers have adopted high-resolution OLED panels, which, according to Kazuo Oishi, director of Furuya Metal, predict that the screens will become more popular thanks to ultra-fast 5G video streaming. “The company has had a big increase in sales over the past year, ” he says. “
The company did not provide detailed data, but said sales of chemicals, including niobium compounds, doubled from fiscal 2017.
Masami Sawato, a senior analyst at SBI, a Japanese brokerage, says Japanese materials suppliers are constantly improving their expertise while servicing domestic manufacturers of chips, displays and finished consumer electronics. “Today, end products are being replaced by products from China and South Korea, but key materials are still in Japan. “
The analyst added that this year’s diplomatic dispute between Japan and South Korea had highlighted “the dominance of Japanese suppliers”. With imports from Japan restricted, South Korea has been able to rush to respond, claiming to have invested nearly $850m to develop and produce critical semiconductor materials at home.
The Japanese government’s export restrictions on photosensitive inhibitors, hydrogen fluoride and fluoride polyamide have hurt some domestic companies, but Yamamoto and others say it has had little impact on their business esthe.
Solar-induced power supplies multi-layer ceramic capacitors (left), while Deshan supplies aluminum nitride
Japanese parts makers are also poised to benefit from China’s investment in 5G.
Tsuneo Murata, president of Murata Manufacturing, said in a recent interview with the Nikkei Asia Review that 5G base station products “demand is higher than expected”. The company is the world’s largest supplier of multi-layer ceramic capacitors (“MLCC”), a tiny component that stores and releases electricity to ensure the smooth flow of electricity in telecommunications equipment.
Taiyo Yuden, the third-largest MLCC maker behind Murata and Samsung, has invested 10 billion yen to boost production. In March, the company opened its third MLCC plant and is building another plant, which will start production next spring.
“Over the past few years, we’ve been increasing capacity at a 10 percent rate every year. Mike Tanahashi, technology marketing manager for Solar Impulse, said: “But we remain concerned that we may not be able to supply enough MLCCs as demand is expected to grow significantly. “
The number of capacitors used in smartphones has almost doubled in the past eight years, according to the company. High-end phones such as Samsung’s first 5G phone, the Galaxy S10 5G, have about 1,300 capacitors, 30% more than 4G phones.
Mike Tanahashi points out that “with 5G driven by the growing demand for small capacitors that can store more power.” Only a few suppliers can offer such high-performance components. “
All indications are that China will need a lot of that kind of spare parts, and will soon need them.
Although South Korea and the United States have pioneered 5G networks, their reach is limited, and China is rapidly catching up with, or even surpassing them. In June, the chinese government issued 5G licences, months ahead of schedule, allowing China Mobile, China Unicom and China Telecom, the three big mobile operators, to launch services in October.
The three companies gained 9 mfrom of 5G users in their first month. China is expected to have 600m 5G users by 2025, or 40 per cent of the world’s total, according to the GSMA, a London-based industry group.
Of course, there will be a need for large-scale investment steam behind this.
China Mobile is expected to provide Rmb200m in subsidies for 5G handsets to encourage users to upgrade their phones. The company also plans to set up a 5G fund worth more than Rmb20bn to boost the industry.
Goldman Sachs estimates that China will invest more than $150bn in 5G by 2025.
Huawei’s Liang Hua believes the technology will be widely available early. He told Japanese listeners that 5G would penetrate the market twice as fast as 4G and would gain a foothold in three years rather than six years.
Anritsu, another lesser-known Japanese company, has also reaped the rewards. The company’s electronic measuring instruments are used to detect the proper functioning of 5G devices, which are essential tools for companies such as Huawei and Qualcomm.
In the first half of this year, amsier’s operating profit soared 90 per cent to Y6.6bn as demand soared in China.
“China’s move shows america its determination to move forward with 5G. Hirokazu Hamada, chief executive of Anli, told the Nikkei Asia Review. “For China, 5G is a national project, and they can’t afford to lose in this competition for technological dominance, ” he said. “
Mitsue Oba, senior analyst at IHS Markit, also sees 5G as an important “national project” for the Chinese government, but warns that “a big challenge for China is whether expensive 5G devices can become mainstream.” “
Telecomoperators in China are trying to offset the cost of equipment with subsidies and affordable traffic packages, the cheapest currently at 128 yuan a month.
Hirokazu Hamada of Anli believes that the Chinese government is determined to gain an advantage in 5G at all costs. (Le Bang)