Large PCB investments in Japan take the front seat.

Sangyo Times recently released a news report outlining the investment activities for PCB and IC substrate manufacturers in Japan. The report listed 21 companies as major investors for projects in the industry, and also announced that the majority of investments would be used to increase the manufacturing capacity of IC substrates and their raw materials.

NTK, a large manufacturer of ceramic and organic substrates, will invest more than 30 billion yen (US$1.00 = 116 yen) over the next two years to build the 14th Japanese manufacturing plant for organic IC substrates. Seven more companies, including TCP substrate manufacturers, budgeted more than 10 billion yen class investment plans for the next two years.

The report also stated that IC substrate manufacturers expected more growth and demand for MPU devices used in portable products such as laptop PCs, cellular phones and MP3 products. Flexible substrate and tape manufacturers such as Mitsui Metal Smelting and Casio Micronics also expected more growth and demand for chip-on-film (COF) substrates used for the driver modules of flat panel displays, especially large size LCD TVs. Nitto Denko, one of the major flexible substrate manufacturers in Japan, budgeted over 10 billion yen for a "carrier flex" process targeting the display and disc drive market. Material suppliers, including base materials and copper foils, are also planning relatively large investments since they forecasted higher than expected demand.

It could be true that the IC substrate and COF markets will grow over the long term; however, demands fluctuate sporadically and over a short period of time. This could lead to supply outweighing demand in the market. This is especially true for flexible laminate materials. I predict an unbalance between supply and demand because too many suppliers entered the market during the last two years, and because total supply capacity for manufacturers is much higher than the practical demands forecasted.

A critical point to analyze is the manufacturers' projected costs and falling prices relative to their investment plans. Currently, flexible laminates are working on relatively large margins. These margins will be squeezed in the near future as selling prices fall for COF substrates due to the business strategies of consumer electronics companies in Japan and Korea. Several material suppliers do not consider falling prices when formulating their investment plans, and probably, some of them would not be able to survive a price war with their competitors.

Headlines

Denki Kagaku, a material supplier in Japan, will begin volume production of packaging materials for electronics components in China. Kuraray, on the other hand, has decided to close its business of screen materials for rear projection TVs.

Electronics company Kyocera has commercialized a new LCD series with LED backlights for industrial use instead of CCFL. Meanwhile, Hitachi Displays will begin to export LCD modules for European customers in automobile applications.

Dai Nippon Printing will install a manufacturing line of color filters for LCD devices with ink jet printing system in the Kameyama Plant of Sharp.

Material supplier Mitsubishi Gas Chemical has developed a new transparent polyimide film for optical device applications, and MEC, a chemicals supplier for PCB processes, will invest 1.2 billion yen in a new plant in Taiwan for PKG substrate manufacturers. It is scheduled to begin operation in April 2007.

Noritake Co., a ceramic material and equipment supplier in Japan, has rolled out a new conveyer furnace for the LTCC substrates. The new furnace is said to simplify the firing process and reduce manufacturing costs.

Component supplier Omron has commercialized a new circular type waterproof connector for sensor and actuator modules with cables that are said to reduce connection time significantly. The company also acquired Pioneer Precision in order to expand the manufacturing capacity of backlight modules for small LCD devices. Concurrently, Sumitomo Rubber withdrew from the LCD backlight business. The manufacturing facility and employees will transfer to NEC LCD Technology.

Sumitomo Chemical will build a new manufacturing plant in Poland for optical films designed for LCD devices. It will begin operating in the summer of 2007. Showa Denko, a chemical company in Japan, completed construction of its R&D center in Ichihara, Chiba for next generation hard discs.

Dominique Numakura is president of DKN Research; dnumakura@dknresearch.com.