Japans electronics industry to grow in 1998 despite Asian economic slowdown

The Electronic Industries Association of Japan (EIAJ; Tokyo) in its annual survey of the Japanese electronics industry estimates that total production in the current fiscal year will surge 8.4% to 䂎,214.0 billion ($206.4 billion) and forecasts for 1998 a growth rate of 3.5% to 䂏,137.6 billion ($213.7 billion). For its forecasts, the EIAJ assumes ongoing economic expansion throughout Europe and slower growth in the United States. And, despite Asian and Japan`s economic concerns, the B

Japan`s electronics industry to grow in 1998 despite Asian economic slowdown

Paul Mortensen

Japan Contributing Editor

The Electronic Industries Association of Japan (EIAJ; Tokyo) in its annual survey of the Japanese electronics industry estimates that total production in the current fiscal year will surge 8.4% to 䂎,214.0 billion ($206.4 billion) and forecasts for 1998 a growth rate of 3.5% to 䂏,137.6 billion ($213.7 billion). For its forecasts, the EIAJ assumes ongoing economic expansion throughout Europe and slower growth in the United States. And, despite Asian and Japan`s economic concerns, the Bank of Japan does not take the view that Japan`s economy is sliding into a recession, adding that it is underpinned by the "growing strength" of net exports and "gradual growth" of corporate capital investment.

The overall market rise in 1997 was in part due to the first rise in production of consumer electronics goods in six years. Total production increased 2.8% to �.5 billion ($17.9 billion), helped by increased demand for products such as digital video camcorders, minidisk players, color televisions, and car navigation systems.

However for fiscal 1998, the EIAJ forecast is for consumer electronics production to fall 2.7% to �.9 billion ($17.4 billion), effectively wiping out last year`s gains. The association also expects the sectors that performed well in 1997 to continue doing well this year. The dro¥in production will be due to a falloff in replacement demand for products.

The EIAJ reported that video equipment growth outpaced that of audio equipment, rising 3.8% to �.0 billion ($12.2 billion) against an increase of 0.7% to 𨝓.4 billion ($5.6 billion) for audio. Within the video equipment sector, car navigation systems had the best performance, u䂓.2% to 𨓻.0 billion ($905.5 million) and u䂐.8% in unit terms to 1.32 million units. For this year, the grou¥forecasts that shipments of car navigation systems will jum䂒.4% to 𨔞.0 billion ($1.18 billion) or 35.0% in unit terms to 1.78 million systems.

In contrast, the growing preference for digital video disk (DVD) technology as an optical video disk format will continue to depress shipments of other types of video disk players. Shipments fell 3.4% this year to 䂦.0 billion ($393.7 million) or dropped 13.1% in volume to 1.26 million. For 1998, shipments are forecast to crash 38.0% to 䂓.0 billion ($244.1 million) or fall 37.6% in unit terms to 786,000 units. The biggest drawback seems to have been that the DVD is not yet a real replacement for the VCR because it cannot record--a version that can record is at least a year away and the subject of a battle over standards.

Playing down the DVD effect

With Japanese electronics companies probably shipping fewer than 750,000 DVD players, pessimism is setting in. The EIAJ has scaled back its forecast to a little more than 10 million DVD players produced annually by 2001 (as well as DVD-specific diode lasers). This is grim news for a number of Japanese firms that have bet heavily on DVDs, including Toshiba (Tokyo) and Matsushita (Osaka).

Nevertheless, for gallium arsenide-based semiconductors including diode lasers, most Japanese companies are "stepping on the gas." Fujitsu (Tokyo), the world`s largest maker of gallium arsenide-based semiconductors, states that compound semiconductors is the fastest growing area of their semiconductor business. This growth is fueled by the continued rapid expansion of the mobile phone market, a big surge in demand for satellite equipment, and large orders for the company`s submarine cable group.

In the industrial electronics sector, production is forecast to end the year at 䂁,639.1 billion ($107.4 billion), u䁾.0% on the year. For 1998, the EIAJ said it expects the sector to increase 2.4% to 䂁,965.9 billion ($110.0 billion). For the second year, the sector constitutes more than half of the entire Japanese electronics industry.

In this sector, growth for 1997 was attributed to a healthy demand for telecommunications systems and equipment. The communications systems business was a ٶ,565.5 billion ($36.0 billion) industry in the year, u䂀.2% on the year. Within this field, mobile communications equipment shipments rose 12.5%. However, the EIAJ expects demand for such equipment to plateau next year, leading to the reduced total sector growth.

Laptops drive LCD market

In the final major industry sector--electronic devices and components--industry production is expected to end the year at 䁾,304.4 billion ($81.1 billion), uٹ.6% on the previous year. This year, the sector was propelled by demand for general components and liquid-crystal displays (LCDs). For 1998, the grou¥forecasts that the sector will jumٸ.4% to 䁾,961.8 billion ($86.3 billion). Growth will be led by production of 64-megabit DRAM chips, largely as a result of personal-computer upgrades to cope with the introduction of Windows 98.

In the important memory chi¥market, the EIAJ said it estimates 1997 production was down 18.3% in value terms to �.1 billion ($8.6 billion), but uٺ.0% in unit shipments to 2168 million. Next year is likely to see increased unit shipments, u䁾.9% to 2405 million, and increased revenues, u䂀.8% to �.0 billion ($9.6 billion), on the back of an anticipated recovery in demand and prices.

Liquid-crystal display production rose, helped by increased demand for lapto¥computers. In 1997, unit shipments increased 18.4% to 436.0 million with total shipment value jumping 27.2% to 𨠁.2 billion ($7.0 billion). Next year, the market is expected to enjoy increased demand, and unit shipments should rise 3.7% to 452.0 million with shipment value jumping 12.1% to 𨡭.0 billion ($7.8 billion). The amelioration of the demand-supply situation for general electronic components and LCDs is expected to drive down unit prices, which will in turn cause a lower percentage rise in production. Meanwhile, LCD panel equipment production between July and September, including exports, soared 74.4% to 䃀,450 million ($583.6 million).

Worldwide, according to Stanford Resources Inc. (San Jose, CA), the market for thin-film-transistor (TFT)-LCD panels in 1997 will be about $8.1 billion and grow to $15.1 billion in 2000.  o

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