The Japanese Ministry of Economy, Trade and Industry (METI) released September’s production data for the electronics industry in Japan.  A nine-month snapshot for the first three quarters is now available, and allows us to review a few market trends and assess our plans for the remainder of the year.

Total revenue for the Japanese PWB industry in June came in at 45.3 billion yen, a 2.8% drop from the previous month and 14.3% drop compared to the same month last year. Total shipments equaled 1.4 million sq. meters, a 0.2% decrease from the previous month and 6.9% decrease compared to the same month last year. Historically, business in Japan rebounds during September, right after summer vacations. Shipments increase in October, November and December due to the year-end shopping season. However, the data from September reflects a negative growth compared to August and the same month last year. There was also a decrease in revenue. The decline in terms of percentage is larger that the percent decrease in volume. This means prices are dropping – not only is volume dropping, but so too are sales. Market indices for the third quarter are pointing downward after a negligible growth rate during the second quarter.

Three of the primary product categories from the Japanese PWB industry are posting troublesome sales data. Buildup multilayer boards, double-sided and multilayer flexible circuits and rigid base module substrates for semiconductors have experienced dramatic swings in monthly shipments since last autumn. Sales of buildup boards and rigid module substrates have declined month over month. Their lackluster sales volume could equal those from 2008 and 2009, when the industry hit an historic low during the global recession. Volume from double-sided and multilayer flexible circuits posted positive growths for the last four months; unfortunately revenue did not grow as much as the volume. This can be attributed to lower prices. The remaining market segments show a relatively stable sales trend, but the trend is heading slightly downward.

There could be two reasons for sales to fall. The first is the slow down in business for domestic electronics manufacturers such as Panasonic and Sharp. Their market share has dropped considerably, and these big companies are bleeding money. It will take a long time for them to recover from these huge losses. The second reason is the pricing pressures from the market are shrinking profit margins. Foreign printed circuit board manufacturers are competing vigorously for the same customers – the only way to capture market share is to lower prices. In the good old days, Japanese manufacturers were very profitable with their double-sided and multilayer flex and rigid module substrate product lines. Their overseas customers preferred high performances and a high quality product produced in Japan. Korean and Taiwanese PWB manufacturers greatly improved the quality of their products over the last few years.  Not only are the products comparable to their Japanese counterparts, but their prices are considerable lower. This is eroding a customer base that was once loyal to Japanese manufacturers.

Cumulative total revenue for the first nine months of the year decreased by 2.2% compared to the same period last year even though volume increased by 1.6%.  The industry needs a remarkable turnaround during the last quarter to post a positive growth rate for the year. There is only one month left in the year, and I have not heard any singing or whistling from Japanese PWB manufacturers.

The Japanese PWB industry is facing a challenging business climate with some problems that are not easy to solve. I don’t want see the same collapse in the near future as the American PWB industry experienced early 2000s. Let’s hope that history does not repeat itself.

Dominique K. Numakura
DKN Research, www.dknresearchllc.com

Headlines of the week
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1. JX Nippon Oil & Energy (Major metal & oil supplier in Japan) 11/6
Has decided to close the silicon wafer business for photovoltaic cell because of extreme global price completion.

2. TOWA (Packaging company in Japan) 11/12
Has been developing a new molding technology for the encapsulation of the large size wafer substrates over 12 inches.

3. SMM (Major metal product supplier in Japan) 11/15
Has installed a new manufacturing line and started the volume production of large size (6 inches) sapphire substrates for LED devices.

4. Unimicron (Major circuit board supplier in Taiwan) 11/22
Has been increasing the manufacturing capacity of the embedded component PWB. It became 3 million units per month in the 4th quarter 2012.

5. Hitachi Chemical (Major electronic material supplier in Japan) 11/26
Has developed a new glass material with low melting points (220 ~ 300 degree C) for the reliable encapsulation of ceramic and metal packages.

6. AUO, Innolux (Major display suppliers in Taiwan) 11/27
Are planning volume production of the active matrix type OLED panels in the first quarter of 2013.

7. LGD (Major display supplier in Korea) 11/27
Became the major supplier of the display panels for iPad mini of Apple. Taiwanese manufacturers don’t have enough capacity.

8. SII (Major electronics company in Japan) 11/27
Has rolled out a new electronic dictionary with 5.1” color display and touch panel screen.

9. Toshiba (Major electronics company in Japan) 11/28
Has developed a new BIS type CMOS image sensor with 13 million pixels for smart  phones and tablet PC. ( )

10. TSMC (Major semiconductor manufacturer in Taiwan) 11/30
Has been considering to expand the manufacturing capacity assuming new orders for the MPU of iPhone and iPad from Apple.

DKN Research Newsletter #1236, Dec. 2, 2012 (English Edition)
Electronic Packaging Industry News from Japan & Asia
(www.dknresearchllc.com)

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