Japan’s manufacturing path another angle for success

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The “unexpected” trade spat between Japan and South Korea revealed that it is the support from Japanese suppliers that has allowed South Korean companies to dominate the semiconductor market for so many years.

This begs the question: Has Japan’s manufacturing sector, which has been mired in a series of quality scandals in recent years, been undervalued?

Has Japan been “hiding” its economic strength and technological innovation strength in all these years?

And how can “made in Japan” be viewed objectively?

For starters, it is undeniable that Japanese companies are strong in terms of technical competence. For example, Shin-Etsu Chemical Co, founded in 1926, is good at researching and producing basic materials. The company is unknown to the public, but it is the world’s largest supplier of semiconductor silicon.

Shin-Etsu Chemical is not alone. Although Japanese manufacturers have gradually faded out of the public view in the market for downstream products such as home appliances and smartphones, they play a crucial role in improving production efficiency and product performance during the manufacturing process. When it comes to indispensable chemical and electronic materials, spare parts, precision equipment, instruments and other “upstream” areas, Japanese companies still retain their strength. Japanese companies such as Sony supply smartphone makers with a wide range of key components such as touch screens and cameras. Meanwhile, Toray, Teijin and Mitsubishi Chemical jointly control nearly half of the global market share for aircraft materials, according to Japanese media reports.

Moreover, Japanese companies believe in diversified development and not putting all their eggs in one basket. For instance, Toyota, Japan’s largest automaker, is switching from being a carmaker to a provider of “mobile travel services”.

From the historical perspective, the Japanese manufacturing industry has had its highs and lows. Take the semiconductor sector for example. Before the 1990s, Japanese companies not only occupied the upstream, but also dominated the rest of the industrial chain. In 1990, six of the top 10 semiconductor companies around the world were from Japan. But since the beginning of this century, Japan’s semiconductor sector has withered because of US suppression and international competition and Japanese companies disappeared from the top 10 list.

The difficulties Japanese companies face are real. Although “made in Japan” remains competitive in some niche areas, some recent quality scandals have inevitably given the impression that its manufacturing strength is on the decline.

“Made in Japan” was once a demonstration of Japan’s innovation capability. So what is holding back the pace of the once great innovator in the new era? Factors such as technological progress, industrial shifts and market competition may explain the situation. But, more importantly, it may be because of the industrial reorientation by Japanese companies in the face of market competition.

Based on the latest changes in Japanese companies, the key strategy for Japanese manufacturing to maintain competitiveness is “breaking up the whole into parts,” a new path for the Japanese manufacturing sector in the global manufacturing chain.

Other manufacturers prefer to create a whole system or complete machine to build up their brands, their system and their market position. But the Japanese manufacturing sector is now taking a different path and is focusing on key components.

What’s special about the strategy is that while others are competing for market share and trying their best to create a brand, Japanese companies only need to make high-quality core parts, which are indispensable for all and may bring even higher profits.

With the global shift towards consumer societies, the world has entered the era of competition for market space – and the future competition in the machine and system market may become more fierce. But with the market expanding, no matter which company’s brand wins, the core components of the Japanese manufacturing sector will always have their position in the market.

The new path of the Japanese manufacturing sector shows that there are many models for market competition. If one can be indispensable in the fierce market space competition, then it will be the real winner. That’s the “truth” behind the evolution of the Japanese manufacturing sector in recent years – and where its competitiveness lies. The competitive strategy, technical competence and the “fine manufacturing” spirit of Japanese manufacturers deserve attention from China’s manufacturing and policy departments. GLOBAL TIMES

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