The Japan-Korea trade friction reveals that Korean companies have dominated the semiconductor market for many years, yet they need Japanese suppliers in the semiconductor industry, and Japanese companies can easily take a hold on the Korean companies. One has to wonder if the scandal-filled Japanese companies have been underestimated and if Japan has been "hiding" its economic strength and technological innovation. All these boil down to one question: what can we learn from "Made in Japan"?
What should affirm everything above all is that Japanese companies have abundant technical ability and technical reserves. In addition, there are many semiconductor giants in Japan. For example, Shin-Etsu Chemical Co., Ltd., which founded its business with selling nitrogen fertilizer in 1926, specializes in the research and manufacturing of basic materials to meet the market demand and even it monopolized the crucial raw material market within the industry today. Currently, it is the world's largest supplier of silicon wafers and the largest silicone products manufacturer. Shin-Etsu Chemical is able to produce a uniform crystal structure of single-crystal silicon with a purity of 99.999999999%, which places it at the world's leading technology level. Shin-Etsu Chemical is not alone, however. Although Japanese manufacturing companies are gradually fading out in the downstream industries such as home appliances, smartphones, and others, they still play key roles in the upstream industries including the indispensable chemical and electronic materials, spare parts and precision equipment, among others. According to a survey conducted in 2018, Japanese companies ranked first in market share in 11 out of 74 target categories. Among them are digital cameras, composite machines, motorcycles, CMOS (complementary metal-oxide-semiconductor) image sensors, polarizers, lithium batteries for mobile phones, and others. In fact, many of the later parts are used in smartphones. Japanese companies such as Sony still continue to supply a wide range of key components including communications, touch screens, and cameras to smartphone makers. A Japanese research company disassembled the Apple iPhone XS Max and found that 13.5% of the parts were made in Japan. In addition, three Japanese companies, Toray, Teijin, and Mitsubishi Chemical control nearly half of the global market in aircraft manufacturing materials, according to Japanese media.
Made in Japan is also found in many less visible but vital areas. For example, Japan produces 80% of the world's precision small motors. Seiko has a global share of nearly 40% in bearings production while YUKI Precision is a small firm that produces precision gyroscope that can be used in small satellites. What is noteworthy is that Japan's Ministry of Economy, Trade, and Industry (METI) has designated a dozen specific manufacturing basic technologies, all in the hands of small and medium-sized enterprises. Japanese media called these companies "small but beautiful". Some Japanese manufacturing companies have dug deep into their traditionally advantageous fields and are currently striving for excellence in their respective fields.
Moreover, following the principles of diversification and not putting all their eggs in one basket is another common idea among Japanese companies. Toyota, for example, Japan's largest automaker, is shifting from being an automaker to being a provider of "mobility services". Panasonic sold off its Sanyo white goods units as early as 2012. At present, apart from a small part of the home appliances business, Panasonic's main business forms are environmental solutions, automobiles, consumer electronics, etc.
From the historical perspective, we can see the peak and evolution of Japanese manufacturing development. Take semiconductors as an example. Before the 1990s, Japanese companies not only occupied the upstream of the industrial chain but also led the whole industry chain. In 1990, Japanese semiconductor companies accounted for six of the top 10 semiconductor companies in the world. However, since the beginning of this century, Japan's semiconductor industry has declined amid U.S. pressure and international competition, and Japanese semiconductor companies have been ranked among the world's top 10. The difficulties faced by Japanese companies are real. Despite Japanese manufacturing remaining competitive in some sectors today, the repeated quality and management problems inevitably give the impression that the aura of this manufacturing power is fading. According to Yuichi Washida, a scholar at Hitotsubashi University, Japanese manufacturers have suffered "four straight defeats" in the competition for international standards in software, integrated circuits, internet and mobile networks since the late 1980s.
The image of "Made in Japan" was once the embodiment of Japan's innovative capacity, therefore, what was it that hindered the pace of this former big innovative power in this new era? The reasons behind may be technological progress, industrial relocation, market competition, and others. More importantly, however, it may perhaps be the factor pointed out by Chan Kung, chief researcher at ANBOUND, that Japanese companies have adjusted their strategies and industrial development direction in front of market competition.
According to Chan Kung, judging from the latest changes of Japanese companies, the key strategy for the Japanese manufacturing industry to remain competitive now is "from integration to zero", which is a new path for the Japanese manufacturing industry in the global manufacturing chain. Other manufacturers seeking to expand their businesses thereby try to cover the entire industrial chain, which seems to be an ideal competitive strategy. However, the Japanese manufacturing industry is now taking a different strategy -- many Japanese companies have withdrawn from the businesses of taking charge of the whole machine, which includes system, branding, and marketing. For instance, Toshiba, and Sanyo have long withdrawn from the whole machine business, but they have grasped the key components market and realized the strategy of getting "from integration to zero". What is unique about this strategy is that while other people are marketing their brands, Japanese companies only focus on the production of high-quality core components, because it is a core part of the entire industrial chain, and the resulting profit margin may be higher than that of the business model which covers the whole industrial chain. As the world gradually shifts to the consumer society, the world has entered a market space competition era, the market competition of the whole machine and the system may be more intense in the future. But as the market expands, no matter which company's brand wins the market, the core components of Japanese manufacturing are indispensable and Japanese manufacturing will have its own stable market.
Final analysis conclusion:
The new path of Japanese manufacturing shows that there are many patterns of market competition, and those which are indispensable in this fierce competition for market space will emerge as the real winners of the competition. This is the "truth" behind the competitiveness and evolution of Japanese manufacturing in recent years. This kind of competitive strategy, technical ability, having an industrial system in which a large number of "small but beautiful" companies participate, as well as the "fine manufacturing" spirit demonstrated by the Japanese manufacturing industry, are all worthy of reference and studying by China's manufacturing and policy sectors.
