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Edition 03/2018

Trump may impose 25% tariffs on all vehicles imported into the U.S.

US President Trump has asked the administration to consider import restrictions on automobiles and asked them to raise tariffs up to 25%. Against the backdrop of his protectionist trading policy, it seems that this have a big influence on the global activities of Japanese automobile manufacturers.

This move will be the measure following the raise of steel and aluminum tariffs in March this year, but this time the damage to the Japanese economy will be much larger. The annual export of iron and aluminum to the United States only amounts to 220 billion yen. Besides that, many products are technically on a high standard and cannot be substituted easily by US companies.

On the other hand, nearly 40% of Japan's automobile exports go to the US, and the total amount of exported goods reaches about 4.6 trillion yen annually, accounting for about 30% of the total export value. In total, the export value of automobile parts to the US is about 900 billion yen.

Japanese car manufacturers have reduced their exports to the US since the late 1980s and have increased local production in the United States. Among the cars sold in the US in 2017 by , the production ratio in the United States exceeds 70%. produces about half of its automobiles in the United States. However, the annual exports of Japanese automobile companies reached roughly 1.7 million units in the United States, accounting for about 20% of domestic production. Even though each company has increased its local production in the United States, if import restrictions become real, it will have a negative effect on their business performances.

Car market share in USA Car market share in Japan

US Cars Japanese 0,5% Cars 43,7% EU Cars Other 8,6% 56,3%

Source: Jiji Press Ltd.

Toyota is exporting hybrid vehicles such as Prius, SUVs and luxury cars "" to the United States. The export quantity reached 710,000 units in 2017, accounting for 20% of the domestic production with about 3.2 million units. Toyota stated that it is necessary to maintain “a domestic production of 3 million units" in order to keep employment up at its own company and its automotive parts companies. Japanese In 2017, while only exporting about half as much as Toyota, NissanCars still exported about 350,000 units to North America (including Canada etc.). (Subaru) whose90,9% brand power is increasing locally exported 347,000 units to the United States. , which does not have a production base in the United States, sells about 280,000 units to North America, which accounts for more than 20% of the approximately 970,000 units it produces. In 2021, a joint venture between Toyota Motor and Mazda will open in Alabama, but if tariffs are raised before that, it will be a severe blow for the companies.

JAPAN Contact: Heiwa Hasegawa, Representative Telephone: +81 3 5276 6632 Fax: +81 3 5276 2455 E-mail: [email protected] VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444 2 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Current Economic Scenario

Domestic economy worsened for two months in a row due to rising crude oil prices The economic DI of Teikoku Databank (TDB) announced on June 5, 2018, decreased by 0.4 52,0 Development of economitc DI points from the previous month to 49.4, which 51,0 worsened for two consecutive months. The domestic economy in May rose as the price 50,0 of gasoline and diesel oil rose as the price of 49,0 crude oil dropped to the level of 72 dollars per barrel (WTI) for the first time in about three and a 48,0 half years, the cost burden of companies and 47,0 individuals increased, It became a factor to push down feeling. In addition, consumer-related 46,0 industries in the retail and service industries 45,0 worsened due to weakening of consumer Source: TDB Source: TDB sentiment due to price increases of food and 44,0 electricity charges and serious shortage of 5 7 9 11 1 3 5 7 9 11 1 3 5 manpower. Expansion of protection tradeism by 2017 2018 2019 the United States Trump regime also dropped negative to corporate sentiment and deteriorated for two consecutive months for the first time in 11 months. With the uncertainty surrounding the environment surrounding the Japanese economy, the domestic economy continued stepping down as the rise in crude oil prices resulted in increased cost burdens of companies and individuals.

The domestic economy is expected to continue steadily due to continued increases in exports against the background of the global economic recovery, labor saving in capital investment and demand for the Tokyo Olympics. Consumer spending will continue to be moderate recovery from warming demand including rising summer bonuses and rising consumption tax rate. Meanwhile, we need to watch carefully about trends in overseas situations, such as intensifying trade friction between the US and China, fears of economic slowdown in Europe and increased geopolitical risks such as the Middle East. Moreover, an increase in cost burden accompanying shortage of manpower and the stagnation of economic policy will have a negative influence. Although exports and capital investment are expected to lead the future domestic economy, it is necessary to pay attention to the possibility that the emergence of overseas risks will downgrade the economy. (Teikoku Data Bank, 05.06.2018)

62.4% of companies plan capital investment in FY 2018 Teikoku Databank (TDB) has conducted a survey of corporate attitudes towards the capital investment plan for FY 2018 (Survey period: April 16 – April 30, 2018, Companies Surveyed: 23,118, Valid Responses: 9,924). Around 62.4 % of companies “have” plans to make capital investments in 2018. The breakdown shows 6.9% for "already implemented", 35.2% for "planned" and 20.3% for "under consideration for implementation". On the other hand, " have no plans" was 29.8%. Looking at the companies planned for capital investment by size, 70.7% of "large enterprises", 60.3% of "small and medium enterprises(SME)", and 49.0% of "small enterprises" revealed the fact that the situation large differences depending on company size.

Capital investment plan in FY 2018

Already Capital investment plan by size 80,0% implemented 70,7% don’t know 6,9% 70,0% 60,3% 7,8% 60,0% 49,0% 50,0% no plan Planned 40,0% 29,8% 35,2% Under 30,0% consideration 20,0% for 10,0% implementation 0,0% 20,3% Large SME Small enterprises enterprises

Source: TDB Source: TDB VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

3 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

By industry, “agriculture, forestry, and fisheries” show the highest (80.4%), and “transport, warehousing” (78.0%), and “manufacturing” (75.0%) also show high percentages.

Capital investment plan by industry in FY 2018 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Agriculture, forestry, and fisheries 80,4% Finance 53,3% Construction 55,5% Real estate 48,5% Manufacturing 75,1% Wholesale 53,6% Retail 67,5% Transport, warehousing 78,0% Services 58,9% Source: TDB

With respect to capital investment details, “replacement of equipment” (45.4%) was the highest (multiple answers), followed by “maintenance and repair of existing equipment” (35.7%), “labor saving/ rationalization” (28.2%), ”increased production, strengthening of sales ability (for domestic)” (24.1%), and “informatization-related (IT investments)” (23.8%). Investment in manpower shortage ranked high, along with replacement demand. (Teikoku Data Bank, 16.05.2018)

Capital investment detail in FY 2018 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Replacement 45,4% Maintenance and repair 35,7% Power saving & rationalization investment 28,2% Increase production & sale force 24,1% ICT 23,8% Office 17,3% Development of new business for domestic 15,3% Logicstic & warehouse 9,0% R&D 8,2% Energy saving, environmental measure 7,5% Development of trial products 6,4% Development of new business for export 4,5% Response to Regulation 2,7% other 3,0% Source: TDB

Regular employee 'shortage' is 49.2%, record high in April According to a trend survey on manpower shortage conducted by Teikoku Databank, labor supply and demand is increasingly tightening, such as the fact that the ratio of job offers to job seekers for 2017 recorded the highest level in 44 years. Under these circumstances, the impact on the profitable environment has begun to appear in companies, for example, as a result of rising labor costs. Also, in addition to being difficult to secure talented personnel, supply constraints due to lack of human resources has become a concern for the growth of the Japanese economy. Meanwhile, the working environment has become a bright situation for job seekers, which is also a favorable material for expanding employment opportunities and raising wages for workers

The number of companies with shortage of regular employees increased by 5.5 points from 49.2% to one year ago, and has reached record highs in April. In April, there is a tendency for manpower VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

4 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

shortage to relax in Japan, but the sense of human labor shortage continues. By industry, "information service" such as soft contract development is the top with 69.2%. Below, six industries such as "Transportation / warehouse", "Construction", "Food and beverage retail" were 60%. In addition, "lease · rent" and "machine manufacturing" have increased by more than 10 points from one year ago, and the shortage of personnel is rapidly increasing. In terms of size, the lack of human resources in small companies is also expanding while the feeling of shortage by large corporations is further strengthening

32.1% of companies are short of nonpermanent employees (2.5 points increase from one year ago). By type of industry, "food-services" and "food and beverage retail" exceeded 70%, as well as "information services", "maintenance, security, inspection services" etc. Six industries in the top 10 industries are retail and personal services, which is a shortage in industries with many opportunities to contact consumers. As with full-time employees, the larger companies are more scanty, and companies with fewer employees are getting more serious in companies with fewer employees. (Teikoku Data Bank, 24.05.2018)

60,0%

Regular employees 49,2% 50,0% Nonpermanent employees 40,0% 32,1% 30,0%

20,0%

10,0%

Source: TDB 0,0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0% 20% 40% 60% 80%

Information services

Transportation / warehouse 2016

Construction 2017 2018 Food-services

Broadcasting

Maintenance, security, inspection services

Leasing, rent services

Food and beverage retail

35,6% Machine manufacturing 44,0% 55,8%

Finance Source: TDB

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

5 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

For many VDMA companies operating in Japan, the shortage of talent is very serious, and despite robust demand and business opportunities, business expansion is not possible in many cases. In particular, human resources who can speak English and knowledge of engineering have been constantly lacking, but at the present time there are also shortages of human resources such as sales and administrative affairs. In addition to chronic talent shortage, young Japanese tend to prefer large companies and domestic companies as stable workplaces. Even German SMEs are hidden champions, even companies that are active globally, their popularity in Japan is still low and recruitment tends to be more difficult.

Sea Japan 2018 "Sea Japan 2018" was held at Tokyo Big Sight for three days from April 11 to 13. It is the thirteenth exhibition and total number of exhibitor was 580 (Japan: 359, Overseas: 221) and Number of visitors was 20.226. This time Sea Japan recorded the most number of exhibition companies and visitors so far. Germany is the largest exporter of high-tech marine equipment worldwide. Germany has also exhibited as a German pavilion several times in the past. Among exhibitors from abroad, the number of exhibitors from Germany was third largest after Korea (55 exhinitors) and Denmark (28 exhinitors). (22 exhinitors from China, 19 exhinitors from UK). Several German companies that have branch offices in Japan have also exhibited, showing a great presence, including the German pavilion.

On 11th April the opening event of the Japanese branch of Becker Marine Systems was held. On 12th April, a seminar organized by VDMA was held. German equipment suppliers are forerunners in all important development trends: Maritime Digitalization. VDMA – German Marine Equipment and Systems – provided a brief overview on the most recent trends of the German marine equipment branch, dealing with today’s technological challenges of worldwide shipping and shipbuilding. The venue where more than 60 people visited the seminar was full. At the seminar, VDMA member companies Mecklenburger Metallguss GmbH, L'Orange GmbH and KBB Kompressorenbau Bannewitz GmbH made a presentation. The next edition of Sea Japan will be held in March 2020.

(Photo: VDMA Japan)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

6 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

IoT Spring 2018 In the background of growing interest in IoT and digitalization technology, the 27th Japan IT Spring Spring 2018 took place in Tokyo Bigsight. The largest Japanese IT trade fair is now held three times a year and consists of 12 different trade fairs such as Software & Apps Development Expo, Big Data Management Expo, Embedded Systems Expo, Data Storage Expo, Information Security Expo, Web & Digital Marketing Expo, Data Center Expo, Cloud Computing Expo Japan, Mobile Solutions Expo, IoT / M2M Expo, Direct Commerce Solutions Expo, Store & Retail IT Solutions Expo and AI & Business Automation Expo. From 9-11 May visited 102,441 people from the world. Some VDMA member companies such as Siemens, Phoenix contact or Wago have also participated.

(Photo: VDMA Japan)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

7 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Digitalisation in Japan -Quo Vadis

IVI and JEMA collaborate, concerning IoT standardization On April 19, 2018 Industrial Valuechain Initiative (IVI) signed an agreement with the Japan Electrical Manufacturers Association (JEMA), which agreed to collaborate and cooperate with each other toward the realization of smart manufacturing.

IVI and JEMA have agreed to collaborate and cooperate in activities of the following items. 1. International activities and international standardization activities 2. Research exchange and personnel exchanges 3. Promoting exchange among members 4. Mutual support of human resource development 5. Mutual utilization of research facilities and facilities 6. Other matters deemed necessary for achieving the purpose of this Agreement

IVI and JEMA collaborate with the exhibition hall on the theme of digital factory at Hannover Messe 2018 held from April 23 to April 27 as the first collaboration in the field of international activities and international standardization activities. They will set up exhibition booths and introduce their activities.

In the future IVI and JEMA will cooperate in R&D exchange, human resources exchange, inter-member exchange, human resource development, mutual use of research facilities and facilities. IVI plans to support the proposal of new standards and research to confirm its effectiveness in the product field covered by JEMA. (Nikkan Kogyo Shimbun, 20.04.2018)

Security measures, 70% of manufacturing industry insufficient by Ministry of Economy, Trade and Industry (METI) survey As a result of the Ministry of Economy, Trade and Industry's survey on the security measures of the manufacturing industry, it was found that nearly 70% of companies to be counted did not have adequate measures. With the spread of IoT, the threat of cyber attack increases, but the countermeasure seems to be slow. SME companies, especially those who are the foundation of basic manufacturing, are generally less aware of the crisis. Manufacturers often deal with important confidential information such as design data regardless of major, medium or small, spreading concerns about unintended outflows.

The Ministry of Economy, Trade and Industry (METI) conducted questionnaires on security measures of manufacturing industries such as confidentiality management. Among the 4,300 respondents who answered, 42.0% accounted for the companies that said "measures are taken but insufficient". "I felt the necessity, but it did not reach a countermeasure," followed by 26. 8%. On the other hand, only "25.9%" is "taking appropriate measures", it became clear that manufacturing security measures are still insufficient. (Nikkan Kogyo Shimbun, 08.05.2018)

Current situation of security measures (in the manufacturing industry) 5,2% We are taking appropriate security measures

25,9% We are taking some measures, but they are not 26,8% sufficient

We believe that security measures are necessary, but they have not yet been implemented 42,0% We do not believe that security measures are necessary

Source: METI

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

8 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Concerns related to cybersecurity 2,3%

11,2%

21,0% We are highly concerned We are concerned We are not very concerned We are not concerned at all

65,5% Source: METI

RRI, Japanese-German joint document for accelerate IoT standard development The Robot Revolution Initiative Council (RRI) formulated a collaborative document between Japan and Germany in cooperation with German standardization bodies to advance international standardization of next-generation manufacturing using IoT.

It will be announced at the International Industrial Technology Trade Fair "Hanover Messe" which will be held on April 23 in Hannover, Germany. "Advanced predictive maintenance" is taken up as an example of the future image to be realized with IoT, and the required services, on-site functions, etc. are arranged. This made it easier to examine the required standards. (C) iStock / 12224787_kapley

RRI is the executing organization of efforts on IoT for the manufacturing industry of the Ministry of Economy, Trade and Industry. Based on the contents of this collaborative document, Japan and Germany are planning to accelerate the discussion on standards development progressing at the International Electrotechnical Commission (IEC) and others. In the document, we set up a mechanism to provide optimal maintenance services based on machine operation data as one example of the future image. We have organized the relationships of various related business operators and actions in the field based on the internationally recognized reference model "IIRA", making it easier to advance the discussion on standardization.

RRI also made it possible to refer to existing international standards that are relevant, based on documents. At the IEC, the "System Committee" (SyC) on Smart Manufacturing (next-generation monozukuri) will be launched within the year, and debates on the standardization of IoT for manufacturing industry are expected to begin in earnest. Japan, the United States, Germany, China and so on will participate. (Nikkan Koygo Shimbun, 20.04.2018)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

9 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Industry Scenario

Automobile Industry

Toyota adding fuel cell and hydrogen tank production capacity; foresees 30,000 vehicles Toyota Motors’ headquarters at Toyoda City, announced plans to construct a new facility to manufacture fuel battery stacks, a major component of FCVs. May 24. This is in addition to the high pressure hydrogen tanks production facility at its Shimoyama site in Miyoshi, also in Aichi Prefecture. The company views FCVs as a pillar of its business and expects its annual sales of FCVs worldwide to surpass 30,000 vehicles by late 2020. It is preparing a ten-fold expansion of its current production capacity. (C) flickr_Mike Mozart The high pressure tanks which store the hydrogen fuel are being produced on a dedicated line in the 15,000 square meter No 3 plant at the company’s Shimoyama plant. It will add to the company’s current two sites for hydrogen tanks, at the company main factory and at one other site. The value of the investment was not disclosed. The company expects the facility to be operational by around 2020. Toyota also offers FCV buses and commercial vehicles. Its heavy-duty FCV Mirai which was launched in 2014 with a hefty price tag of JYE 7 million per vehicle, recorded sales of approximately 2,700 units in Japan, America and Europe in 2017. The take-up is not progressing as well as expected. The next model is planned to go on sale after 2020. (Nikkei Shimbun, 24.05.2018)

Nissan, Renault, Motors joint development of mid-sized EVs The triple alliance of , Renault and is jointly to develop a dedicated platform (chassis) for mid-sized electric vehicles (EVs) by approximately 2020. The common platform is expected to be used for the Quashquai model and several other sports utility vehicles (SUVs). The three companies foresee production of the first vehicles in 2020, and within five years all mid-sized SUV models will be build around the common platform.The companies plan for the platform to have a production capacity in the range of two million vehicles. The combined sales of three companies’ EV models (including Nissan’s ‘Leaf’ and Renault’s ‘Zoe’) in 2017 was 91,000 vehicles, up 11% on the previous year. They plan to introduce twelve more EV models by 2022, and see the joint platform as central to this plan. The three companies also envisage joint development of platforms for other EVs in other sizes. The three companies’ have a combined global sales target of 14 million vehicles by 2022, combining gasoline and EVs. Of this figure, four models from the joint platform are expected to account for nine million vehicles sold. (The Nikkei Shimbun, 24.05.2018)

Softbank group experiments with automated drive EV bus Softbank Drive, a smart mobility research and development subsidiary of the Softbank Group, announced on May 20 that it will start operational testing of an EV automated drive bus at Riken’s Harima Science Garden City in Hyogo Prefecture. The vehicle will run on a 1.7 kilometer loop with five stops. The vehicle will be used for transporting visitors and employees around the site. The test is a joint operation between SB Drive and a local bus operator to determine the practicality of the vehicle, confirming safety and other issues over the four-day period. The test vehicle is a French-made Navya EV bus which has no driver’s seat or steering wheel. (The Nikkei Shimbun, 17.05.2018)

Sumitomo Riko in JYE 190 billion capital investment by 2022 Sumitomo Riko, a manufacturer of vibration-resistant rubber and other automotive materials, announced a capital investment plan totalling JYE 190 billion over the five years to FY2022. The investment was part of the medium-term business plan announced on May 24, and is an increase of 24% over the actual spend of 153 billion yen in the past five years. The plan proposes new products

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

10 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

combining rubber and sensors of various parts and functions as electro-mobility and automated driving become more widespread. Investment is set to continue increasing, with R&D investment rising to JYE 100 billion from JYE 68 billion of previous five years. The development emphasis is on cooling parts for high capacity batteries, vibration isolation suspension systems, and other electro-mobility applications where high demand is expected. (The Nikkei Shimbun, 24.05.2018)

Isuzu Motors increases investment by JYE 350 billion; emphasis on ‘CASE’ development Motors announced it will increase its investment by JYE 350 billion over the three years ending in March 2021, aligning its targets on next-generation technologies such as automated driving and electro- mobility. While nothing can be done to stop the decline in domestic demand for commercial vehicles, the company is diversifying revenue sources by increasing maintenance services domestically and prospecting for new commercial vehicle markets in emerging countries. Investment in capital and equipment will account for JYE 250 billion of the investment, and JYE 100 billion has been allocated for advanced technology and alliances. Although the capital investment figure is less than the JYE270 billion yen in the previous medium-term plan, it now has a more strategic axis. (The Nikkei Shimbun, 24.05.2018)

Furukawa Denko JYE 10 billion Philippine investment grows wire harness output Furukawa Denko is to ramp up its automotive wire harness output capacity, investing JYE 10 billion until 2025 in expanding its plant in the Philippines. The investment will install the latest production equipment and processes in the plant, equipping it to meet growing demand primarily from North America. The investment aims at 20% increase in wire harness sales revenue by 2022. Mexico is currently the centre of automotive wire harness production for the North America market. However, there are increasing orders from car makers for strategic global vehicles, and Furukawa is already receiving orders from new clients for the North American market. (The Nikkei Shimbun, 21.05.2018)

Seven car makers report earnings; four report operating income up Of the seven car makers reporting their consolidated annual earnings for the financial year ending March 31, 2018, four companies increased their operating income. All seven companies increased global sales against a backdrop of a weaker yen on currency markets. While FY2019 global sales look set to grow, the strengthening yen and higher raw materials costs will be a headwind. In addition, research costs are increasing noticeably in next-generation technologies. Nissan reported higher sales and lower operating income as it carried costs arising from inspection problems. Toyota reported 36.2% growth in net income to JYE 2.4939 trillion, re-gaining its record high for the first time in two quarters. Operating profit rose to JYE 265 billion, lifted by a weaker yen trading three yen lower at 111 yen to the dollar. Strong performance was reported by Motors in India, Indonesia, Thailand; and Mitsubishi Motors in all ASEAN countries and China; both companies reporting double- digit global sales growth. With the effect of lower corporate income tax in the United States, Honda recorded net income over 1 Trillion yen. Car makers have significant investment plans. Toyota is planning to make its largest ever R&D investment in the United States, valued at 1.8 trillion yen, of which 35% is to be allocated to automated driving and other next-generation technologies. Mazda is increasing its investment in expanding its sales and services network in theUnited States. (Nikkan Kogyo Shimbun, 07.03.2018)

Aichi Sangyo dealership agreement with German company on friction stir welding machines for EV parts Aichi Sangyo has signed a dealership contract with industrial plant maker Grenzebach Maschinenbau GmBH (based in the city of Hamlar) for the sale of friction stir welding machines. The agreement will expand sales of box type friction stir welding machines which use three-dimensional coordinates to process parts for EVs, where demand is forecast to grow. Aluminium joint and plate welding, fusion of aluminium plates and die cast parts are among the expected applications. The friction stir welding machine went on sale domestically on May 24th and is offered in X, Y, and Z axis configurations with a C-axis rotating tip. It is available in two sizes, DSM 1400 and DSM 2400, covering a wide range of operations. Each machine is priced between 100 - 150 million yen (excluding tax), including delivery and installation options. The companies target annual sales of 2 units. (Nikkan Kogyo Shimbun, 06.02.2018) VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

11 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Mitsubishi Logistics withdraws from development of forklift engine Mitsubishi Logistics is withdrawing from its development of an engine for forklift trucks, shifting its development effort to core components for electric powered forklifts, where demand is high. It will continue to produce engines and engine-driven forklifts, but will not develop new engine designs.Developing fuel injection and other peripheral parts positions the company to meet fuel emission and efficiency standards. With increasingly stringent global environmental standards, electro- mobility is capturing more of the investment in research and development. (C) iStock / 5508622_bbossom

Mitsubishi Heavy Industries and its subsidiary Mitsubishi Logisnext develop and manufacture diesel and gasoline engines for forklift trucks with an in-house production ratio of approximately 80%. Although they are progressing with development to meet the tougher emissions standards being introduced in the EU in 2020, higher costs are inevitable. As forklift engine technology is mature, the company will meet further emission standards by developing injection systems, superchargers and auxiliary equipment. Development investment will focus on motors for electric vehicles.

Europe accounts for the highest share of electric-powered forklift trucks, at 80%. The corresponding share in other markets is 70% in the US; 60% in Japan, 50% in other Asian territories and just above 30% in China. However, China is debating introducing stronger emissions standards in 2020, raising the possibility of an across-the-board shift to electric vehicles. China already has strong general-purpose car engine makers, but Mitsubishi Logisnext sees a business opportunity in the electro-mobility wave. (Nikkan Kogyo Shimbun, 01.05.2018)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

12 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Electronics

Nitto Denko: volume production for 8K cable from FY2019; 50 billion yen investment Starting in the spring of 2019, Nitto Denko will mass produce plastic optical fiber suitable for communication over a short distances, where conventional glass is difficult to use. A sharp increase in demand for optical fibre is expected as high definition 8K video and high speed fifth generation (5G) wireless communication takes hold. Nitto Denko will invest a cumulative 50 billion yen by FY2023, building a business with annual turnover of 100 billion yen. A new factory will be built at the Onomichi Plant and a new optical cable production line established at the Kameyama Works during FY2018.

Although this is Nitto Denko’s first venture in the optical cable business, the company will fully optimise its expertise in polymeric material molding technology and circuit printing on flexible substrates. The company believes the market for plastic optical fibre cable will take off in the 2019-2020 financial year and grow to around 300 billion yen in FY2023. This growth projection is based on the expectation of continuing market demand for the larger volume and higher speeds of data transmission that optical cable provides, together with the fact that plastic cable at present accounts for only 10% of total optical cable. (Nikkan Kogyo Shimbun, 21.05.2018)

Fuji Electric to increase production of power semiconductors; 33 billion yen plant investment in current financial year Fuji Electric plans 33.2 billion yen capital investment in its Electronic Devices business in FY2018, triple the figure of the previous year. The focus of the investment is strengthening production capacity of power semiconductors. Total capital investment in FY2018 is expected to grow by 91.1% to 50.6 billion yen. In addition to electronic devices, the company also plans to increase investment in its Power Electronics Systems segment by 63.2%, to 12.4 billion yen. In its consolidated earnings for FY2017 the company reported 893.4 billion yen in sales and 55.9 billion yen in operating income. Both operating profit and operating profit margin of 6.3% were the highest ever. The (C) iStock / 15069864_RainerPlendl electronic devices segment, which the company plans to emphasise going forward, accounts for about 25% of operating profit. The segment has the highest operating income margin of the company’s business segments, expected to reach 11.4% in FY2018, a rise of 0.6 points from the previous year. (Nikkan Kogyo Shimbun, 02.05.2018)

Tokyo Electron employs first robot on semiconductor production, doubling production Tokyo Electron is deploying robots on its semiconductor production facility, doubling its production efficiency. In addition to production, in June the company aims to introduce several automated vehicles to carry parts around its production site in Miyagi Prefecture. This is the company’s first deployment of robots in production. (Nikkan Kogyo Shimbun, 10.04.2018)

Horiba investing 1.3 billion yen in EV storage battery evaluation Horiba Ltd. announced on May 22 that it will set up a facility to evaluate the performance of storage batteries for EVs and other applications at its development and production site in Oitsu. The investment is valued at 1.3 billion yen. Construction is to begin in July, and the facility is expected to be operational in 2019. Its speciality is the ability to conduct combined evaluation of the battery and vehicle performance. Evaluating the performance of storage batteries is increasingly important for EVs and hybrid vehicles. Horiba acquired a British company in 2015 and established Horiba Mira. The company’s plant and equipment at its main site are being strengthened so that its expertise in vehicle battery development can be fully optimised for the domestic market. (Nikkan Kogyo Shimbun, 23.05.2018)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

13 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

GS Yuasa - increasing car battery production at home and overseas; focus on engine- start GS Yuasa is to increase production of EV batteries for the domestic and international markets. It will increase output capacity of lithium-ion batteries at its production subsidiary in Shiga Prefecture by 60%, concentrating on engine-start batteries. The company also intends to start producing a similar function lead-acid battery in Myanmar in 2023. Demand for cars with idling-stop functionality is expected to grow as global environmental regulations become stronger. The number of production lines at Lithium Energy Japan, GS Yuasa’s joint venture with Mitsubishi Corporation and Mitsubishi Motors, is to be increased from five to eight. The investment is valued in the region of 5 billion yen. The batteries are produced as semi-finished products, to be finished in 2019 and supplied to a new plant in Hungary. The engine-start type will debut in Europe, from where it will be rolled out as the drive type for the future. GS Yuasa is planning to construct new lead-acid battery factories in China and Turkey to strengthen its supply chain, with a focus on emerging markets in Asia. While demand for EVs is growing in developed markets, in the emerging markets a high demand for HV batteries is foreseen. (Nikkan Kogyo Shimbun, 21.05.2018)

Murata: capital investment up 10% to 340 billion yen in current FY, focus on capacitors Murata Manufacturing Company announced an investment plan on March 31 outlining a 10.9% increase over the previous period. The investment is centered on capacitors and batteries. Capacitors are a core product for the company. Murata has 40% share of the global market for capacitors. The plan calls for extending the Izumo Murata Manufacturing plant and expanding production facilities at the Fukui Murata Manufacturing plant, foreseeing a double-digit growth in production capacity in two years. The company is also considering strengthening its production sites in the Philippines and China. (Nikkan Kogyo Shimbun, 30.04.2018)

Domestic ethylene production up 2.7%; steady demand and consistent operation The Petrochemical Industry Association announced on April 19 that domestic ethylene production in FY2017 was up 2.7% from the previous year, to 6,453,900 tons. Periodic plant repairs were few and demand was steady, allowing plants to maintain full operation. Maintenance and repair work is being concentrated in FY2018, so there is a possibility that the FY2018 figures will be lower. As of March 2018 domestic production was down 12.9% on the same period of the previous year, a drop of 494,700 tons. Major plant maintenance operations caused the first minus figure in two months. The average plant operation rate was 97%, up 0.9 points over the corresponding period of the previous year, surpassing the break-even point of 90% for the fifty-second consecutive month. The effect of the maintenance work was that output of four major resins, with the exception of polystyrene, was down. Priority was given to inventory buildup for domestic shipments and future maintenance, particularly for export use. (Nikkan Kogyo Shimbun, 20.04.2018)

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14 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Steel & Metal

Crude steel output down 0.3% due to fire and other mishaps; first drop in two years The Japan Iron and Steel Federation reported in its interim FY2017 results that domestic crude steel production decreased 0.3% from the previous year to 148.351 million tons, the first decline in two years. Fire and other incidents at the steel works had an effect on output. Domestic demand from the automotive and construction sectors remains strong; activity related to the Tokyo Olympic and Paralympic Games, and to exports, is also expected to grow. Due to these factors, FY2018 sales are expected to exceed the FY2017 level. (Nikkan Kogyo Shimbun, 20.04.2018) (C) iStock / 153767537_sinceLF

Cast and forged steel down 2.3% on weak demand The Steel Castings and Forgings Association of Japan reported that total output of cast and forged steel at the country’s 70 plants in February was 2.3% lower than the same period of the previous year, dropping to 13,590 tons, the first corresponding month decline for a year and two months. Forged steel production at the country’s 18 plants declined 2.1% to 50,179 tons, the first decline in seven months from the corresponding month of the previous year. The Association believes that demand for both cast and forged steel is recovering, but over-capacity is presenting problems.

Although there is steady demand for cast steel in the mainstay construction machinery sector, a significant increase is unlikely due to the steel makers’ limited production capacity. Demand conditions are favourable for molds, press and shear machines for the automotive sector (commercial vehicles), but shipbuilding has continued to decline slightly while demand for industrial machinery and power generation equipment is also sluggish. Forged steel has remained steady for steel molds used in automobiles and automobile parts, and rolls for crude steel. However, there are no still no signs of recovery in demand for shipbuilding and power generation equipment. The Association expects that both cast and forged steel will continue to rely on the automotive and construction sectors. (Nikkan Kogyo Shimbun, 24.04.2018)

Four steel makers announce higher earnings and prices Japan’s four major steel companies announced increased revenue and earnings in their FY2018 consolidated earnings report. In addition to strong domestic demand, higher prices to reflect higher raw materials costs also helped earnings. Net consolidated earnings at each of the four companies was as follows: Nippon Steel & Sumitomo Metal - 297.5 billion yen, an increase of 70% JFE Holdings - JYE JYE 216.3 billion, a 2.5 fold increase Nisshin Steel - JYE 18.8 billion; a 3.1 fold increase Kobe Steel - JYE 71.1 billion, reversing a deficit of JYE 19.1 billion.

While the manufacturers were able to pass on cost increases of their main raw materials in price rises, there have also been significant cost increases in secondary raw materials such as manganese and zinc, and also in distribution costs. Major overseas producers such as POSCO in Korea and Baoshan Steel in China are further along in their recovery. Although there is steady domestic and overseas demand for steel, pricing and operational stability raise questions about profitability. (Nikkan Kogyo Shimbun, 30.04.2018)

Flat aluminium production up 1.1% to over 2 million tons The Japan Aluminium Association has reported output (combined flat rolled and extrusion products) of 2,594,490 tons in FY 2017, a 1.1% increase from the previous year, the second consecutive year-on- year increase. Demand for lighter weight vehicles in the automotive sector is a contributory factor, off- setting the slump in aluminium plate used in the beer and canned drinks sector. Shipments also increased by 0.4%, to 2,052,222 tons, for the second consecutive year. Production and shipment volume has exceeded 2 million tons for four 4 consecutive years. The major shipment category was flat rolled products to the automotive sector, accounting for 173,775 tons, a 7.4% increase. This was the highest ever volume on a fiscal year basis, surpassing the 168,914

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tons in FY 2007. Extrusion products for automobiles also increased by 4.5% to 145,986 tons, a favourable result. On the other hand, shipment of flat plate for the canning industry decreased by 1.8% to 426,623 tons. Extrusion products for construction fell 0.4% to 461,660 tons. Although there was demand in the public and construction sectors related to the Tokyo Olympic Games and the Paralympics, work was slow due to unseasonable weather in the summer. (Nikkan Kogyo Shimbun, 02.05.2018)

Chemicals & Pharmaceuticals

Nissan Chemicals to enter EV battery materials business; mass production next year Eyeing the popularisation of EVs, Nissan Chemical Industries intends to produce undercoating for the next-generation lithium ion battery over the next three years. It expects to achieve rapid charging times by using a nano level coating process. Currently the material is awaiting evaluation by battery makers, and in the earliest case mass production techniques could be established in 2019. (Nikkan Kogyo Shimbun, 11.05.2018)

Domestic ethylene production up 2.7%; steady demand and consistent operation The Petrochemical Industry Association announced on April 19 that domestic ethylene production in FY2017 was up 2.7% from the previous year, to 6,453,900 tons. Periodic plant repairs were few and demand was steady, allowing plants to maintain full operation. Maintenance and repair work is being concentrated in FY2018, so there is a possibility that the FY2018 figures will be lower. As of March 2018 domestic production was down 12.9% on the same period of the previous year, a drop of 494,700 tons. Major plant maintenance operations caused the first minus figure in two months. The average plant operation rate was 97%, up 0.9 points over the corresponding period of the previous year, surpassing the break-even point of 90% for the fifty-second consecutive month. The effect of the maintenance work was that output of four major resins, with the exception of polystyrene, was down. Priority was given to inventory buildup for domestic shipments and future maintenance, particularly for export use. (Nikkan Kogyo Shimbun, 20.04.2018)

Fuji Chimera predicts 12% growth in chemical materials to JYE 280.6 billion by 2021 By 2021, the market for chemical materials used in cosmetics and daily use products will grow 12.8% from the 2017 figure, reaching 280.62 billion yen, forecasts Fuji Chimera Research. Despite the negative domestic factors of declining population and a maturing cosmetics market, there is a strong demand for toiletries and cosmetics from visitors to Japan and returning Japanese residents making cross-border purchases. These factors have expanded the market for chemical materials applications in cosmetics and toiletries, which broke through 250 billion yen in December 2017. With the ‘Made in Japan’ brand clearly established in Asia, cosmetics manufacturers are adding new domestic production capacity. Regardless of their price range, cosmetics are expected to meet high-performance needs, and the market for chemical materials in cosmetics and toiletries is continuing to grow. (Nikkan Kogyo Shimbun, 09.05.2018)

BASF contracts production of antioxidants in Japan, increasing market demand BASF has started production of antioxidants for thermoplastic elastomers in Japan. It is collaborating with Waterchem, an existing manufacturer of BASF’s customer specific blends. The move will strengthen BASF’s speciality plastic additives business. Waterchem will manufacture Irganox 565 at its plant in Isohara to meet the needs of the Japanese market. It will be used to prevent the deterioration of soft resins such as rubber. The Isohara plant has annual output capacity of 600 tons. Originally a BASF factory, Isohara was transferred to Waterchem in 2016 and has continued since then to produce additive blends for BASF customers. Irganox 565 is used as a stabiliser of rubber and other adhesives. Its speciality is prevention of deterioration even at low temperatures, and it is approved in many countries for use in applications that come into contact with food. (Nikkan Kogyo Shimbun, 11.04.2018)

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16 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Hitachi Chemical Company Ltd. and its subsidiary Chemical Electronic Materials (Taiwan) Co. Ltd. announced on April 11 the construction of a new factory within the Taiwan site to produce printed wiring boards (prepreg and copper clad laminate). The plant represents a total investment of around 7.5 billion yen, and is expected to be operational by April 2020. Hitachi Chemical's laminated materials for printed wiring boards are highly evaluated in the market, and are used particularly in fields such as 5th generation mobile communication system (5G), advanced driving support system (ADAS) and artificial intelligence (AI) Vigorous demand is also expected for high- performance laminated materials for semiconductor mounting boards over the medium to long term. (Nikkan Kogyo Shimbun, 12.04.2018)

Photovoltaics that you can wear and iron: RIKEN and Toray in joint development RIKEN and the Toray Research Group have developed ultra-thin organic solar cells which achieve an energy conversion ratio of up to 10% and do not deteriorate even at temperatures of 100 degrees Centigrade. Their efficiency is not compromised even when ironed. Attaching them to apparel using a heat adhesion method, they are expected to be widely applied in wearable photovoltaics. Foreseeably the PV cells could be used with sensors and smartphones to monitor the elderly or vulnerable, or in recharging electronic devices worn close to the body. Mass production is expected in the early 2020s. The cells have a thickness of 3 Micometers (a micrometer is 1 millionth of a micro) Connecting 110 substrates on a 5 centimeter square keyboard under simulated sunlight generated a maximum 36 milliwatts of energy. Furthermore, the decrease of conversion efficiency was limited to 20% over an 80- day experiment outside, whereas conventional ultra-thin organic solar cells lose half of their efficiency after 30 days. (Nikkan Kogyo Shimbun, 17.04.2018)

Asahi Glass new research facility at Keihin site AGC Asahi Glass has held a ground-breaking ceremony for construction of a new research center its Keihin site. The company is investing about 20 billion yen in the facility, aiming for completion in July 2019. The new research facility has two objectives:

① To consolidate the current two locations into one, which will concentrate basic research and development, new product development, process development, and equipment development, quickening the pace of research and development ② While conducting R&D laboratories in core technologies, to create a collaborative space capable of working with other companies, exploring new fields and creating new value.

The start of construction marks the end of a process of design conceptualisation and planning. Construction is expected to be completed in July 2019, and the new research and development organisational structure is planned to start in June 2020. (Nikkan Kogyo Shimbun, 19.04.2018)

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17 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Energy

Solar business: cloudy outlook and lower shipments as makers shift to free installation. The photovoltaic power generation association reported domestic shipment volume of 5.24 million kilowatts in FY 2017. This is the third consecutive year of decline, the volume now approximately 40% of the peak reached in FY 2014. The industry has been hit by the development of large-scale projects such as golf courses where panels are easy to install, as well as the collapse of prices in the of the FIT programme.

Domestic manufacturers are clearly struggling to match differences of scale and price with competitors in China and other countries. Domestic manufacturers’ sales fell 24% in FY (C) iStock / 8994251_gchutka 2017, a bigger drop than overseas makers, who saw a 14% decrease. Declining sales led Kyocera to post a loss of about 50 billion yen for long- term contracts of raw materials in the fiscal year ended March 2018 in. Showa Shell Sekiyu Oil subsidiary Solar Frontier is also in the red.

With low panel prices, self-installation on rooftops or land is becoming cheaper in many cases than buying electricity from a major utility company. The manufacturers are looking at how to diversify their sales methods to invigorate the market. (Nikkan Kogyo Shimbun, 22.05.2018)

Survey of new power companies shows 60% profitable and management improving The management of the new electricity suppliers has improved in the two years since the complete liberalisation of retail electricity supply. A survey of the top 100 companies conducted by the Nihon Keizai Shimbun found that 60 percent of the companies were profitable in FY 2017. The new companies account for nearly 10% of electricity sales and are continuing to attract customers away from the conventional electricity suppliers. The new players can be expected to diversify their payment plans and service if their competitive strength grows. The survey was carried out at the beginning of March. The survey was sent to the top 100 companies by sales volume at the as of December 2017, and responses were obtained from 91 companies.

Fifty-five companies replied that they were ‘profitable’ in FY 2017. Tokyo Gas was the leader in advertising spend and other expenses, but made use of its regional retail network providing gas appliances and maintenance to acquire a total of 1.2 million customers from TEPCO holdings, and produce a profit. Its customer base is larger than that of Okinawa Electric Power, and it is the largest of the new suppliers, targeting the household consumer. In FY 2017 the new electricity companies supplied took close to 10% of the total domestic demand. The survey categorised respondents by industry affiliation. There were 24 respondents from the Gas and Oil related sector, and 17 from Telecommunications/IT. (Nikkan Kogyo Shimbun, 19.05.2018)

Yasukawa Electric to mass produce world’s largest generator for offshore wind turbine; aiming at 200 units by FY 2020 Yasukawa Electric will mass produce generators with an output of 15,000 kilowatt for offshore wind power by 2020. At present the world’s largest generator has a maximum output of about 10,000 kilowatts. The generators will be made by the Finnish company Switch Engineering, which Yasukawa acquired in 2014. (Nikkan Kogyo Shimbun, 14.05.2018)

Asahi Kasei in ‘green hydrogen’ demonstration in Germany Asahi Kasei announced that Germany's North Rhine-Westphalia (NRW) State has begun a demonstration project of "green hydrogen” to produce hydrogen from alkaline water using renewable energy. The company is working closely with the state government, and expects the project to lead to the development of an alkaline water electrolysis system. Demand is expected to be high, particularly in VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

18 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Europe. The company aims to have the system commercially available in FY 2020. Asahi Kasei operates an alkaline water electrolysis system using simulated wind power at a related facility in Herten Germany. The mid-sized demonstration uses about 140 kilowatts input.

The company’s products achieve superior energy conversion efficiency, as has been demonstrated by long-running demonstrations in Japan with a 10,000 kilowatts system. The current renewable energy project tests the system to European specifications as part of the company’s technical and market development strategy. (Nikkan Kogyo Shimbun, 08.05.2018)

Aichi Prefecture and Toyota in local low carbon hydrogen supply chain project Aichi Prefecture and Toyota Motors announced the start of a project to generate, supply, and use hydrogen from renewable energy sources within the prefecture. The project will use a fuel cell forklift truck at Toyota’s Motomachi works to construct a hydrogen supply chain making full use of existing infrastructure. It is a collaboration between industry, government and academia in the promotion of hydrogen society. (Nikkan Kogyo Shimbun, 26.04.2018)

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General Industry Development

Year forecast of 21 machine tools, net sales maximum, but cautious attitude For the forecast for the year ended March 2019 of Annual Sales main machine tool companies and divisions, 10 Mio. ¥ companies are predicting favorable results due to 1,821 (12.0) Okuma the rise of global equipment demand, but due to 2,030 (11.5) uncertainty in raw material prices and parts 1,815 (18.2) Makino milling machine shortages, and further in the second half (October 1,825 (0.5) 2018 – March 2019) market environment 1,901 (200) Fanuc Companies that make the growth of profit slightly 1,615 (13.6) increase are conspicuous. JTEKT 1,730 (7.1) 760 (67.6) Makino milling machine, Citizen machinery, Brother Industries Tsugami etc. forecast the highest ever sales, and 613 (-19.4) 640 (28.9) Okuma exceeded 200 billion yen for the first time Citizen machinery in 11 years due to simultaneous worldwide boom. 660 (3.1) 629 (14.0) Toshiba Machine will switch to profitability due to Komatsu NTC demand recovery of the mainstay large-sized 679 (7.9) 575 (40.3) machines, and Howa Machinery will will increase Tsugami sales of machine tools for the domestic 615 (6.8) 501 (4.3) and look for a surplus for the Amada HD first time in five years. Brother Industries has 525 (…) 290 (25.2) forecasted a decline in sales, only orders whose Takisawa Machine Tool orders are almost fixed are taken into 320 (3.4) 288 (21.4) consideration, and consciously looks restrained at Okamoto Machine Tool Works demand for smartphones. 320 (11.0) 266 (12.6) OKK Not only Brother Industries but also some other 270 (1.4) companies like JTEKT estimates it will be lower 237 (-20.3) Toshiba Machine than the previous year in the second half of this 325 (37.1) year. Makino milling is concerned about the 197 (16.5) Takamatsuz Machinery procurement of parts and the influence of US- 224 (13.7) China relations as the second half is uncertain. In 137 (25.5) FUJI China, Tsugami is uncertain about the future of 140 (1.5) the Chinese market, considers the second half 136 (31.0) Enshu conservatively while considering the securing of 223 (63.3) 86 (11.8) parts. Howa Machinery (Nikkan Kogyo Shimbun 28.05.2018) 115 (33.5) 58 (20.4) Waida MFG 2018 (% change rate) 68 (18.6) 51 (43.8) 2019 (% change rate) Hamai 52 (0.3)

4,296 (14.1) DMG Mori 4,500 (4.7) 656 (…) Sodick 810 (…)

Industrial robot, orders received in 2017 increased by 27% to a record high of 944.7 billion yen On May 23, the Japan Robot Association announced that the orders received for industrial robots (total of members and nonmembers) in 2017 increased by 27.8% from the previous year to 944.7 billion yen. It surpassed 2006, and it updated for the first time in 11 years. Exports to China increased by 50%. The Chinese government is focusing on nurturing its own robot industry, and the competition with Japanese forces will intensify in the future. Shipment value increased by 25.1% to 895.6 billion yen. Exports increased by 31.1% to 649.3 billion yen, domestic shipments increased by 11.6% to 246.2 billion yen, both domestically and internationally active. Among exports, sales to China increased by 49.0% to 259.9 billion yen, showing particularly high growth. (Nikkan Kogyo Shimbun 24.05.2018)

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Recovery of mold industries, 80% of production value before Lehman shock The economy of the mold industry is also good with the boom in automobiles, semiconductor industry and others. However, in the automobile industry involving the majority of metal mold companies, electricity conversion and electrical installation have progressed, and it is undergoing a major transformation period.

According to the "Machine Statistics" of the Ministry of Economy, Trade and Industry, mold production which has remained flat has gradually increased in recent years and recovered to 397.8 billion yen by 2016. According to the 16th Mold Investigation conducted by the Nihon Keizai Shimbun at the end of FY2005, the number of enterprises that answered "increase" capital investment in FY 2006 was 41, with 33.1% of the total, nearly five times that of "reducing" I went up. (Nikkan Kogyo Shimbun, 04.05.2018)

Mio. Yen Mold industries, production value Rubber Powdered molds metal 2,4% 600.000 Glass/Blow 1,6% production self- 0,6% 500.000 value manufacture

400.000 Stamping Plastic die molds 39,3% 300.000 34,4%

200.000

100.000

- Die casting Forging die die Casting 7,5% 12,5% molds 1,8% Source: METI Source: METI

Mio. Yen Stamping die Mio. Yen Forging die 250.000 35.000 production self- production self- 30.000 200.000 value manufacture value manufacture 25.000

150.000 20.000

15.000 100.000 10.000 50.000 5.000

- -

Source: METI Source: METI

Mio. Yen Mio. Yen Die casting die Plastic modls 200.000 60.000 production self- production self- value manufacture 50.000 value manufacture 150.000 40.000

30.000 100.000

20.000 50.000 10.000

- -

Source: METI Source: METI

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Glass/blow Rubber molds Mio. Yen Mio. Yen 6.000 14.000 production self- 12.000 5.000 value manufacture 10.000 4.000 8.000 3.000 6.000 2.000 4.000

1.000 2.000

- -

Source: METI Source: METI

Mio. Yen Powdered metal 9.000 production self- 8.000 value manufacture 7.000 6.000 5.000 4.000 3.000 2.000 1.000 -

Source: METI

Increase in machine tool orders by 22% in April, a positive 17th consecutive month, but worrying about parts shortage Japan Machine Tool Builders' Association (JMTBA) announced on May 23 that the order value of machine tool orders in April was 22,063 million yen, up 22.0% from the same month the year before. It is the 17th consecutive month that exceeds the previous year's result. As for April it was the highest ordered amount in the past as a single month as well as the past third order. Demand is robust but parts backlog is accumula ting due to shortage of parts, and room for growth is getting smaller.

External demand (exports) increased by 13.6% to 94,553 million yen. By region, sales to China declined 2.3%, to 30,454 million yen for two consecutive months. The decline in orders related to contract manufacturing service (EMS) of electronic equipment such as smartphone (smartphone) that was in the previous year felt. Asian orders fell by 0.2% to 46.1 16 billion yen, falling below the previous year's results for the first time in 17 months. In Europe, sales rose 22.7% to 19,171 million yen, North America up 34.1% to 27,731 million yen, both of which remained strong.

Domestic demand increased by 35.8% to 68.5 billion yen. Strong growth is continuing centering on automotive and semiconductor related fields.

The delivery schedule extended due to lack of parts such as guide products, the backlog balance in April reached 770.9 billion yen, an increase of 34.2%. Yoshihiro Iimura, the president of the same industrial association who held a press conference on the 23rd on the 23rd, said, "I saw it would be dissolved in the summer, but component makers are not talking about the growth in orders, as the growth in orders is more than expected talked. (Nikkan Kogyo Shimbun, 24.05.2018)

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Noah to introduce German made connecting device for high-pressure liquid coolant Noah Corporation is to begin sales of a mini plug series used as a connecting tool for high pressure coolant liquid on June 1. It is manufactured by the German firm HEB Systemtechnik. Using the stainless steel braided plug hose allows a secure connection even inside a narrow tank. It can operate with automatic lathes up to maximum pressure of 20 Mpa. The price is 35,000 yen (excluding consumption tax) for a set of two knitted type straight plug hose 200 mm and two Spec 2 compatible joints. Noah aims to sell 500 sets in FY 2018. (Nikkan Kogyo Shimbun, 29.05.2018)

Toyoda Gosei eyes 1 Trillion yen sales in FY2025; industrial and medical robotics Toyota Motors group company Toyoda Gosei projects consolidated sales over 1 trillion yen by FY2025. While electro-mobility and automated driving are growth areas, the company also has a view to enter the field of industrial and medical robotics. Toyoda Gosei is a specialised manufacturer of rubber and resin products. The automotive sector accounts for 90% of the company’s sales, primarily in internal components such as airbags. With emerging EV and electro-mobility technologies, the company expects to increase its non- automotive share of sales to 20% by FY 2025. If automated driving becomes more widespread, it is foreseeable that the company’s electronic components will be increasingly mounted around the grill and other external areas for safety and detection functions. The company is vigorously negotiating with electronics parts manufacturers to develop new components which integrate cameras and sensors. There is growing demand for the company’s airbags from India, China and emerging countries. Toyoda Gosei is also increasing supplies to other car makers (C) iStock / 93241353_julos besides Toyota.

The company’s policy is to deploy its strengths in rubber and resin technology to enter the new field of industrial and medical robotics. The new ‘e-rubber’ material, which stretches or shrinks when electric current is passed through it, should be viable by 2020 and is usable in place of a motor or as a sensor. The company will also strengthen its range of electronic components such as power semiconductors using gallium nitride (GaN). (Nikkan Kogyo Shimbun, 22.05.2018)

DMG Mori targets 30% machine tool output increase of 30% by 2020 DMG Mori plans to increase its machine tool production capacity 30% from the current level by 2020. The company is progressing with renovation at its mainstay plant in Iga and its European plants so annual production can reach 15,000 units. Production volume in 2018 is expected to increase by 10% from the previous year to 11,500 units. However, present supply capacity is limited, and there is an urgent need for investment in increased capacity at home and abroad. The company must also strengthen its ability to respond to increasing demand from a wide range of industries such as automobiles and robots. After-sales maintenance inspections and service are also a priority.

DMG Mori and Nomura Research Institute also announced on May 16 the establishment of a new company to support clients’ production activities. The company is named "Technium". Of the 300 million yen capital, DMG Mori will invest 200 million yen and Nomura Research Center 100 million yen. The new company provides a dedicated site for a client to track the progress and production status of the machine, assisting the client in managing the total process. The new company also provides advice on the optimum processing method and other matters. (Nikkan Kogyo Shimbun, 22.05.2018)

Yasukawa Electric shifts production from UK to Slovenia Yasukawa Electric is to establish a new parts factory in Slovenia, and transfer its UK manufacturing operations to it. The British factory will continue operation for the time being, but Yaskawa will not make any further investments and is also considering scaling down or closing the plant completely. The company is concerned about the impact of tariffs and other issues caused by Britain’s withdrawal from

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the European Union (EU), and Yasukawa is integrating its European robot production to one location within the EU. (Nikkan Kogyo Shimbun, 14.05.2018)

Keihin to increase core EV parts production in 4 billion yen investment Honda-affiliated parts maker Keihin is to increase its production capacity of the core electric power control unit used in EVs and plug-in hybrid vehicles (PHV), aiming to raise output by 2.5 times. It will invest 4 billion yen at its plant in Miyagi Prefecture, aiming to raise annual output from 10,000 units to 25,000 units in 2019. The company also expects to start local production in China around 2020.

The power control unit boosts the electricity supply from the battery to the motor. Keihin has experience of developing and manufacturing the parts for Honda. (Nikkan Kogyo Shimbun, 13.05.2018)

Fanuc to build three new plants, investing 17 billion yen in injection molding Fanuc will invest approximately 17 billion yen to build or extend three factories at its headquarters in Oshino-mura Yamanashi Prefecture. The investment figure does not include machinery. This is the first full expansion of the injection-molding machining factory for 17 years, and the first extension of the wirecut machining factory in seven years. The company is also building a new parts factory for industrial robots and injection molding machines.

There is growing demand focused on China for camera lenses and molds for smartphones and molds, and the company’s existing factories are in full operation. The company intends to strengthen its supply chain and shorten delivery times.

Expanding the RoboShot factory is an investment of around 8.7 billion yen.The surface area is approximately 26,000 square meters. It is expected to raise output by 50% to 600 units per month. Completion is scheduled for September 2018. Expanding the RoboCut factory is valued at 1.8 billion yen. The factory has a surface area of 6,000 square meters. Output capacity is expected to rise 50% to 150 units per month. It is scheduled for completion in November 2018. The machining factory is a new construction with an investment of 6.5 billion yen. It has a surface area of 23,000 square meters. Its monthly output capacity is 1,000 robot parts, 200 RoboShot parts and 50 RoboCut parts. Completion is expected by the end of September 2018. The three factories are expected to enter full operation at the start of 2019. (Nikkan Kogyo Shimbun, 08.05.2018)

Amada invests 15 billion yen in new plant in North America for sheet metal machinery production Amada Holdings (HD) will invest 15 billion yen by 2021, expanding the production and sales structure of sheet metal machines in North America. Constructing a factory in the eastern part of the United States, we begin production of machines for bending metal plates and equipment for automating machining in the USA. (Nikkan Kogyo Shimbun, 26.04.2018)

Yamazaki Mazak, bullish increase production investment for order loss prevention Yamazaki Mazak, a major machine tool maker, is pushing for a bullish increase in production. Inabe MFG, a new factory that was first released to media reporters on May 16, has production capacity of about 100 units a month, mainly for large models, and its domestic production is increased by 20% on a value basis. Original plan to prioritize efficiency rather than capacity enhancement, but the expansion of orders is continuing, giving priority to increased production. Approximately 16 billion yen was invested in Inabe Seisakusho, which started operation in February this year. at this place machines for aircraft and construction machinery industries are produced.

It was in February 2016 that the plan for the establishment of Inabe Seisakusho was announced. At that time, the main purpose was to increase the efficiency by 50% over the production capacity. After that, as the global economy expanded, orders of machine tools continued to increase, deliveries were delayed even when ordered, and the risk of customers flowing to other companies came to be conscious. However, electric vehicles and others are said to be able to reduce the number of parts than conventional petrol vehicle, and there is also the possibility that the demand for machine tools shrinks.

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

24 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Okuma, a competitor, started operation of the new factory building in 2017, and plans a new factory that uses IoT also in Kani City (Gifu Prefecture). DMG Mori Seiki is also planning to establish a new factory at Iga Works. Competition for orders has been intensifying due to the strong demand increase. (Nikkan Kogyo Shimbun, 16.05.2018)

Sumitomo Heavy Industries, Injection Molding Machine Line Refreshing Reduce the number of production processes in Japan and Germany Sumitomo Heavy Industries plans to renew the production line of injection molding machines in Japan and Germany. Place the molding machine on a belt conveyor or rail and make final assembly while moving it. It is easier to improve and easier to identify problems in production compared to the present time when assembling groups divided for each process are sequentially moved to finish products, and the number of production processes can be reduced. Domestic operation starts at the end of May, reducing production man-hours by 15%.

In the German production line, rail is set instead of the conveyor, and it is revised to assemble while moving it in the same way as in Japan. Sumitomo Heavy Industries has received high orders from molding machines since November 2016. The Chiba Plant has a monthly production capacity of over 300 units and is in full operation. We are also considering expanding production capacity. (Nikkan Kogyo Shimbun, 25.04.2018)

NIDEC Shimpo, increased production of gear for robots, at the end of next year, three bases will produce 170,000 units per month On April 18, -Shimpo Corporation announced a new production plan for the precision control speed reducer for robot. In addition to plans to further strengthen the new factory in Ueda City Nagano Prefecture, we have also established a production base in the Philippines. At the end of 2019, we will set the production capacity of Kyoto, Nagano and the Philippines together domestically and overseas to be the system of the planned monthly production of 120,000 units to 170,000 units.

The new plant has rebuilt the building inside the premises of Nidec Seimitsu (Ueda City, Nagano Prefecture) of the Nidec Group. The one period that started was 10,000. We will add a total of 50,000 units by adding the same 10,000 units for the second term as December 2018, and the same 30,000 units for building the new building. Total investment is expected to total 200 billion yen. (Nikkan Kogyo Shimbun, 19.04.2018)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

25 Japan Economic and Industrial Scenario, 03/2018 VDMA JAPAN Liaison Office

Exhibitions

July 2018 Smart Agri Solution Name of the Exhibition Greenhouse Horticulture & Plant Factory Exhibition / Conference (GPEC)) Date 11.07.2018 – 13.07.2018 Location Tokyo Big Sight URL http://www.smagri.jp Smart Agri Consortium Organizer Japan Greenhouse Horticulture Association (GPEC) Visitor number 42.000 (planned) 100 (target in 2018) Exhibitor number 250

Name of the Exhibition Smart Engineering Tokyo 2018 • 1st Plant Engineering & Equipment Zone • 3rd Innovation in Water Management Zone • 8th IoT & AI for Process Industry zone • 1st Energy Saving & Creation Zone • 1st Industrial Waste Management & Recycle zone Date 18.07.2018 – 20.07.2018 Location Tokyo Big Sight URL https://www.jma.or.jp/set/en/index.html Organizer Japan Management Association (JMA) Visitor number 8.548 (2016) Exhibitor number 123 (2016)

Name of the Exhibition Factory & Production Status Visualization • 1st Industrial Robo-Tech Expo • 1st In-Factory Logistics Expo Date 18.07.2018 – 20.07.2018 Location Tokyo Big Sight URL https://www.jma.or.jp/seisan/en/index.html Organizer Japan Management Association (JMA) Visitor number 26.513 Exhibitor number 40

Name of the Exhibition International Graphic Arts Show 2018 (IGAS 2018) Date 26.07.2018 – 31.07.2018 Location Tokyo Big Sight URL https://www.igas-tokyo.jp/en/ Organizer Japan Printing Machinery Association (JPMA) Japan Association of Pre-Press & Digital Printing Systems Suppliers Visitor number 56,533 (including: 5,161 foreign visitors) (2015) Exhibitor number 345 (including: 49 foreign exhibitors) (2015)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

26 Japan Economic and Industrial Scenario, 01/2018 VDMA JAPAN Liaison Office

August 2018 Name of the Exhibition The 20th Japan International Seafood & Technology Expo Date 22.08.2018 – 24.08.2018 Location Tokyo Big Sight URL http://www.exhibitiontech.com/seafood/e_index.html Organizer The Japan Food Machinery Manufactures` Association Visitor number 35,000 Exhibitor number 1,400

Name of the Exhibition Smart Energy Japan West 2018 Date 28.08.2018 – 29.08.2018 Location MyDome Osaka URL http://intermold.jp/english/ Organizer The Energy Conservation Center / JTB Communication Design, Inc. Visitor number 3,007 Exhibitor number 80 (planned)

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

27 Japan Economic and Industrial Scenario, 01/2018 VDMA JAPAN Liaison Office

VDMA Japan Liaison Office

The VDMA liaison office in Japan represents the interests of the German engineering industry toward the Japanese administration and is responsible for exchange with the Japanese association world. The office also assists individual member companies. Simple questions are answered free of charge, while for more complex tasks, the office estimates the expected service costs as an offer. The main tasks so far were:

• Making or sourcing of particular market surveys • Search for business partners • Information about specific Japanese companies • Organize symposia and similar presentations of VDMA members • Supporting of trade fairs • Finding personnel and office/warehouse facilities • Setting up of a Japanese office

Contact: VDMA, German Engineering Federation Japan Liaison Office Heiwa Hasegawa, Representative c/o German Chamber of Commerce and Industry in Japan Sanbancho KS Bldg., 5F, 2-4 Sanbancho, Chiyoda-ku 102-0075 Tokyo, Japan

Tel: +81 3 5276 6632 Fax: +81 3 5276 2455 E-Mail: [email protected] Internet: http://vdmajapan.org

VDMA-Newsletter “Japan”, Edition 03/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444