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Edition 06/2018

The reliability of 's statistics is fluctuating

According to the January monthly economic report released on January 29, 2019, the government reported that the economic recovery that began in December 2012 might be the longest after the Second World War. Exports improved due to the depreciation of the yen, leading the Japanese economy. However, the current economic recovery depends on the yen’s depreciation and fiscal expenditure, and the growth rate increase is minimal. The world economy situation is uncertain due to the trade friction between the United States and China, and raising productivity in the manufacturing industry in Japan again appears as a problem.

Recently, inappropriate processing has been discovered one after another due to fundamental statistics of the government, such as monthly labor statistics by the Ministry of Health, Labor and Welfare, spreading to other ministries and agencies. The reliability of Japan's statistics is fluctuating, and the government formally decided to review 233 other statistics, but the opposition will be taking up this problem during the ordinary session and the government will be hard-pressed to clear this problem.

Last year it seems the performance of Japanese companies has recovered. According to the Ministry of Finance's corporation statistics, the ordinary profit of all industries excluding finance and insurance in FY 2017 was 83.6 trillion yen, the highest ever. The economic recovery in the face of a decrease in workers has resulted in a shortage of workers and companies began to strengthen employment while increasing capital investment for labor saving and automation. The shortage of workers is very serious and it is possible for nearly everyone who is willing to work in a depriving labor field to obtain a job. The wage increase to secure human resources also expanded. Meanwhile, the government changed its policy so far and moved to expand the acceptance of foreign workers. The amendment to Immigration Control Act was enacted in the extraordinary Diet session last year, and it will come into effect from April. The government expects to accept about 345,000 people within the next 5 years.

This year will be “the election year” in which the unified local election and the upper house election will be held. In addition, it has been decided to raise consumption tax to 10% from the current 8% in October. Private consumption, which is accounting for nearly 60% of the gross domestic product (GDP), only recorded a 2% growth rate over the past six years. One reason why consumption is not even despite continued economic recovery is the decrease in disposable income through an increase in social insurance premiums and taxes. While the global economic outlook due to the US-China trade friction etc. is unclear, domestic risks are also present, and it is necessary to keep an eye on the trend of the domestic economy in the future as well.

JAPAN

Contact: Heiwa Hasegawa, Representative Telephone: +81 3 5276 6632 Fax: +81 3 5276 2455 E-mail: [email protected]

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444 Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 2

Current Economic Scenario

Japan’s economy slows for the first time this year GDP growth slowed during the July - September by 1.2% compared to the same quarter of the previous year, the first backward step this year for Japan’s economy. However, nature and climate were the major factors in the slowdown. In its initial assessment, the government-owned Development Bank of Japan (DBJ) calculated the combined damage at around 1 trillion yen from torrential rain over the whole Japanese archipelago in July, typhoons and an earthquake in Hokkaido in September, restricting economic growth in the year by 0.8%.

With the indices reading lower in September, the cabinet downgraded its economic assessment for the first time in two years, from ‘improving’ to ‘neutral’. The impact of the natural disasters is clearly seen in lower production in mining and manufacturing and B2B sales. During the recovery from the historic recession, the judgement based on the indices moved from ‘phase shift’ to ‘worsening’. Although the outlook is downgraded, it is believed that the indices will rebound if the only negative factor is the temporary influence of the natural phenomena. It is possible to escape the conclusion that this is a general deterioration. There are high expectations that the longest period of economic growth since the war will resume its course in January.

Real GDP growth rate, 15,0 Contributions to Quarter-to-Quarter Percent Change in GDP

10,0

5,0

0,0

-5,0

Private Consumption Private Residential Investment

-10,0 Private Non-Resi. Investment Change in Private Inventories

Government spending Export

-15,0 Import GDP

-20,0 I II III IV I II III IV I II III IV I II III IV I II III

2014 2015 2016 2017 2018

Source: Cabinet Office, Government of Japan However, natural factors are not the only background to the indices’ deterioration. It is undeniable that the pace of recovery is also slowing compared to the same period last year. Exports have been flat this year due to slower growth internationally. Asia in particular has lost momentum, where vigorous demand for semi-conductors and electronic parts used in robotics had been a great source of strength in the past 1 - 2 years, producing substantial growth in the second half of 2016. Real GDP has increased by about 30 trillion yen from the beginning of 2013 to the present, and the value of goods exported by nearly 15 trillion yen in the same period. One also observes the strong boost that inbound tourism has brought to consumer spending during the same period, increasing from 1 trillion yen in early 2013 to nearly 4 trillion yen now. What is eye-catching in this three-fold growth is not so much its growing influence of on the value of exports, but the sharp fluctuation in goods exported compared to inbound consumption.

The preliminary estimate of real capital investment during the quarter July - September (GDP base) was revised down 0.9% from the same quarter of the previous year. Although this is a modest decline, the second bulletin was revised sharply downward 2.8%. The DBJ announced its estimate of 6.4% increase in nominal capital investment over the previous year, based on the Bank of Japan Tankan figures, but this is also expected to be revised downwards.

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 3

The Democrats gained control of the House of Representatives as expected in the US mid-term elections on November 6. Although Republicans retain the majority in the Senate, resistance in Congress will make it hard to pass measures on tax cuts, the wall, and social welfare. It is also possible that Trump’s position on trade policy will harden. The impact this is having on exporting countries such as China is becoming steadily more real. There is uncertainty ahead, and it is necessary to keep a close watch.

Trend of private investment Bil. Yen Change rate 90.000,0 4,0

88.000,0 3,0 86.000,0 2,0 84.000,0 1,0 82.000,0 0,0 80.000,0 -1,0 78.000,0 -2,0 76.000,0

74.000,0 -3,0

72.000,0 -4,0 I II III IV I II III IV I II III IV I II III IV I II III 2014 2015 2016 2017 2018

Amount (adjusted series) Q to Q, percent change

Source: Cabinet Office, Government of Japan

Investment in plant and machinery (excluding shipping , electric power and private sector demand) based on indications of advance orders was 18.3% lower in September than the previous month, but up by 0,9% over the quarter July - September. This is the fifth consecutive quarterly increase. The sector is expected to achieve 3.6% growth in the quarter from October to December. This is a downwards revision but is the effect is not yet known. The volume of floor area for construction in the non- residential sector, a leading indicator of construction activity, showed a slight increase.

Machine order, private demand, month-to-month basis Mio. Yen Change rate

1.200.000 15,0 Amount Private demand 1.000.000 10,0

5,0 800.000 - 600.000 -5,0 400.000 -10,0

200.000 -15,0

- -20,0 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2017 2018

Source: Cabinet Office, Government of Japan

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Machine order, private demand, Quarter-to-Quarter basis Mio. Yen Change rate

3.400.000 Amount Private demand 4 3.300.000 3 3.200.000 2 3.100.000 1 3.000.000 0 2.900.000 -1 2.800.000 -2 2.700.000 -3 2.600.000 -4 IV Ｉ ＩＩ ＩＩＩ IV Ｉ ＩＩ ＩＩＩ 2016 2017 2018

Source: Cabinet Office, Government of Japan

By sector, the growth in the automotive and general industry segments since the second half of last year eased in the quarter July to September. In non-industrial sectors, there was a high volume of orders from postal services and railway operators for rail carriages. The hospitality and property sector propped up demand for construction equipment even though it has declined this year. Investment by manufacturing industry in new plant has been vigorous. Meanwhile, the orders from manufacturing industry have steadily increased due to new construction and rebuilding of factories. According to a JMC Survey, the value of exports of machinery was down for the first time in 20 months. (The Nikkei Shimbun, 02.10.2018)

Machine exports decreased for the first time in 20 months, according to JMC survey The Japan Machinery Center for Trade and Investment (JMC) survey for September was released on November 22, showing 1.7% decline from the same month the previous year. Exports were valued 4 Trillion 337 billion yen, the first decline in 20 months. Imports also fell 0.5% to 2 Trillion 66 billion yen. According to JMC, September had two fewer business days than usual, and this was not an insignificant factor in the lower figures. Together with foreign currency fluctuations, this accounted for a 9.4% decline, but show a real growth of 7.7%. By export region, North America was down 0.3%, China increased 0.1%, ASEAN and South Asia increased 2.3%, EU fell 6.7%, Korea and fell 7%, and others were down 2.8%.

By segment the analysis shows increase in 7 industrial sectors, compared to 8 sectors growing sectors in the previous month. Of these, three sectors achieved double-digit growth: shipping (up 11.5%). machine tools (Up 10.7%), internal combustion machinery for land-use (Up 12.8%). The compound figure for all sectors was down 1.7%.

JMC forecasts that the same factors (foreign currency and the number of business days in the month) will lead to a 4.8% increase in October, and a 7.8% increase in export value. (Source: JMC 26.11.2018)

Machine tools exports to China down 36%, “clearly an adjustment phase” JMTBA The JMTBA (Japan Builders’ Association) announced its results for October on November 22. Exports to China fell by 36.8% compared to the same month of the previous year. It was the eighth consecutive monthly decline.The fall in demand from China coupled with lack of growth in the US resulted in a total decline of 0,7%, the first negative result in 23 months.

China is clearly in a period of adjustment. On the same day, at a press conference. the Association’s Chairman Yukio Iimura (also Chairman of Machine), remarked on the noticeable worsening of conditions in the Chinese market, and acknowledged the drop from the 2015-2016 level.

The value of external demand (exports) was down 2.4% to 81.9 billion yen. In Europe, exports rose 8.0% to 22.6 billion yen, and to North America by 16.0% to 22.5 billion yen. Of the four main regions, only China is declining, dragging down the overall performance. The immediate prospects are hard to discern and are bound up with US-China trade friction and worsening political conditions.

By sector, there was a 67.6% decline of 1.9 billion yen in orders for special electronic and precision machinery, which tends to be affected by smartphones. Orders for general machinery also, which closely reflects the economic situation, fell 40.8%, 3.7 billion yen.

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Orders from China are now 60% off their peak of 42.2 billion yen reached in November 2017. JMTBA Chairman Iimura blamed the slowdown on measures to contain over-capacity and the worsening conditions for the semi-conductor industry, as well as the US-China trade conflict. These factors have caused industry to stand back from capital investment. He acknowledged that the fall in orders was approaching the level of the slump from the second half of 2015 to 2016. （Source: The Nikkei Shimbun, Mainichi Shimbun、13.11.2018）

Chinese anti-dumping investigation to shut out Japan and Taiwanese exports to US? The Chinese Ministry of Commerce has started an investigation into illegal price dumping by Fanuc and five other Japanese machine tool manufacturers. Chinese machine tool manufacturers issued a complaint, and the investigation is supposed to finish by October 2019 and a judgement issued. The other defendants are Yamazaki, Mazaki, Okuma, Brother Industries, JTect. Five Taiwanese companies are also named. All of the companies export products to China. If the charge of customs dumping sticks, it is feared to have a big effect on sales. A maximum punitive tariff of 119% can be applied.

JMTB Chairman Iimura remarked that it is hard to imagine Japanese companies would have engaged in price dumping. If the investigation spreads to companies in other sectors, it will cause ‘very big’ damage’ and is a matter of concern. He called on China to clarify its intentions. The situation is clearly confusing, as China has only just in November reduced its tariffs on machine tools.

On hearing of the investigation by China’s Ministry of Commerce, the JMTB issued a list of questions asking China to clarify the definition of ‘Vertical Machining Centers’ (MC), to define the segment parameters and the ‘exclusion of special .’ Dedicated machinery for parts assembly production lines, and ultra-high precision process machinery are also thought to be subjects of the investigation. It appears that more than 20 companies, including Okuma, Fanuc, JTEKT, Brother Industries, and Yamazaki Mazak, are named in the Commerce Ministry’s investigation. （Source: The Nikkei Shimbun, Mainichi Shimbun、16.11.2018）

EPA wins diet approval, became effective February 1. With its LDP and Komeito majority, Japan’s upper house voted to approve the Economic Partnership Agreement (EPA) between Japan and the European Union on December 8. The treaty is to be voted in the EU Parliament in December and at cabinet level in each of the member states, and if ratified it will come into effect on February 1, 2019, creating the world’s largest free trade zone.

The EPA states that it will enter into force on the first day of the second month following completion of the internal procedures, and only the EU procedures now remain. The EPA covers agricultural, forestry and fisheries produce as well as mining and industrial goods , and will remove tariffs on approximately 94% of Japanese and 99% of European products.

The EU will reduce its 10% tariff on Japanese passenger to zero in the eighth year. Tariffs on more than 90% of automotive parts will be quickly abolished. Almost all tariffs on EU agricultural and fisheries produce will be quickly abolished. The effect of abolishing the tariffs will also lower the price of Japanese agricultural and industrial products, including cars, and they are expected to gain market share. Japan will reduce its tariffs on European wine to zero. Wine from France and other countries, which is popular in Japan, is expected to be more affordable. A low-tariff regime will apply to European soft cheeses, reducing to zero in the 16th year.

The TPP 11, (the remaining signatory countries of the Trans Pacific Partnership after the United States withdrew), comes into effect on December 30. The other 10 countries apart from Japan will enter from Year 2 after January 1st 2019. This will quicken the pace of tariff reduction for Japanese industrial goods. The government calculates the combined benefit of the TPP 11 and the EPA will add JPY 13 trillion to the real GDP, and boost employment by around 750,000 jobs.

Japan to start TAG negotiations with US in the new year; high expectations for trade liberalisation despite ‘America First’ poicy The TPP11 and EPA will have the effect of making US agricultural and industrial exports less competitive in Japan. The view is that if the US seeks an early conclusion of the TAG, it will be easier for Japan to assert that the TPP and EPA limit the scope for reducing tariffs on agricultural produce. Progress is being made towards agreement on the Regional East Asia Regional Comprehensive Economic Partnership (RCEP), a free trade zone linking Japan, China, Korea, India with the ASEAN nations to form a free trade zone of 16 countries. (Source: The Nikkei Shimbun, 08.12.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Messe / Events

JIMTOF closes after attracting 150,000 visitors The 29th Japan International Machine Tool Fair (JIMTOF2018) ran from November 1st to 6th, organised by the Japan Machine Tool Builders’ Association and Big Sight Exhibitions). During its six days, JIMTOF2018 attracted more than 150,000 visitors, and plentiful exhibits stimulated interest.

The Nikkan Kogyo industrial daily reported that over 1,000 companies exhibited at the show, the largest ever JIMTOF. Against a backdrop of labour shortages in manufacturing industry, the automated technologies such as process intensive machinery and robots were particularly significant. Among the exhibitors were 140 overseas companies, 60 of which were from Germany. The German machine tools industry association (VDW), together with subsidiaries and agents, gave a particularly strong presence to the German machine tools industry.

Several exhibits connecting IoT (Internet of Things) and AI were on display, and visitors crowded around for a glimpse of the future of digital technologies. The Japan Machine Tool Association “Challenge for Connect” display, a visual demonstration of its linkage to over 300 machines of 72 companies in the exhibition hall, had great appeal. FANUC's factory IoT infrastructure "Field System" and "Edge Cross" initiated by 's etc. realized connected world beyond the foundation. VDW’s introduction of UMATI also attracted a lot of interest from machine manufacturers.

The next JIMTOF will be held from 7 - 12, 2020 at the same venue in Tokyo Big Sight, showcasing further development in machine tools and digital technology.

(Photo: VDMA Japan)

Visit of Federal Minister Altmaier From October 30 to 31, 2018 Federal Minister for Economic Affairs and Energy, Peter Altmaier visited Japan accompanied by a business delegation. The objective behind this trip was to intensify the political and economic relations with Japan.

At a meeting with Seko, Minister of Economy, Trade and Industry and Ishida, Minister for Internal Affairs, they signed a Joint Declaration of intent on economic policy and economic cooperation concerning areas such as digitalization, trade and energy

Federal Minister Altmaier and his delegation took part in an exchange on the current state of AI in Japan and got insight on the current developments and trends in Asia and China from the Japanese point of view. The highlight among these talks was a business roundtable with high-ranking representatives from the major Japanese business federation Keidanren. The discussion included topics such as the future of mobility, digital transformation and current trade and investment conditions.

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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At a reception at the Meiji-Kinenkan representatives of resident German businesses had the opportunity to meet with the delegation, Japanese partners and Federal Minister Altmaier. Before that the VDMA member company WIBUtec's Japanese branch opening ceremony was held. (AHK Japan, Homepage)

(Photo: VDMA Japan)

7 Bavariaa VDMA member companies present Bayern Forum in Japan Bayern Forum in Japan "Industrie 4.0 – Digitalization & Automation", suported by Bavaria VDMA as one of the host organisatior, was held on November 07 in the conference room of JETRO Tokyo Digitalization & Automation Tokyo JETRO. There were more than 120 participants. Ms. Claudia Haimer, Managing Director of Haimer GmbH, who is also Chairwoman of the Board of VDMA in Bavaria, greeted with other Bavarian state agencies.

In keynote speeches by Dr. Masahiko Mori, President, DMG Mori Co., Ltd., he mentioned keywords such as OPC UA and UMATI currently being discussed in Germany while talking about collaboration between Japan and Germany.

From Bavaria this time 14 companies (7 VDMA companies) participated in the mission and visited Tokyo and etc.E-Plan Software & Service GmbH & Co. KG、HAWE Hydraulik SE、FLSmidth Pfister GmbH、Haimer GmbH、Wenzel Group GmbH & Co. KG、KUKA AG.

(Photo: VDMA Japan)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Digitalisation in Japan -Quo Vadis

2025: The cliff edge METI (The Ministry of Economy, Trade and Industry) issued its Digital Transformation Report (DX) pn September 7, emphasising the necessity for continued intensive system renewal by 2025. It is unusual for the government to urge companies to renew their core systems.

The biggest factor preventing Japanese companies from digital progression is the ‘black boxing’ of existing technologies. At present, many Japanese businesses (users) have built their systems around their business divisions, and cannot use the data across the whole organisation. Over long years of operation, these divisional internal systems have become increasingly complex, further exacerbating the problem, creating a ‘black box’ understood only by IT.

In 2025, the core systems operated by 60% of companies will be more than 21 years old, and 90% of corporate IT budgets will be spent on maintenance. Maintenance costs are already high, and this is taking money from IT personnel budgets. The report estimates that the IT skills shortage will rise to 430,000 positions in 2025. There is already an acute labour shortage, and further allocating IT skills to maintaining out- dated systems is not in society’s interest. The skills gap, the scarcity of skilled IT personnel to pursue digital transformation, is (The Nikkei Shimbun) growing, states the METI report.

The damage from leaving existing systems in place is not limited to hindering the digital revolution. Ageing systems run a high risk of breakdown and data loss, which after 2025 will cost up to 12 trillion yen in annual losses, estimates METI. The DX Report refers to this worst case scenario as the 2025 cliff edge.

Approximately 80% of companies have a legacy system in Japan 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Service sector 35,7% 35,7% 14,3% 14,3%

Social infrastructure 6,8% 52,3% 25,0% 15,9%

Financial sector0,0% 38,1% 28,6% 28,6%

Trading sector 11,1% 11,1% 44,4% 33,3%

Maschinery industry 10,9% 43,5% 26,1% 19,6%

Material industry 14,3% 36,5% 27,0% 20,6%

Construction 45,5% 45,5% 9,1%

Total 13,5% 40,9% 25,5% 19,2%

no legacy system partially half almost other

(Source: METI)

The research company IDC Japan calculates the domestic IT market at 17 trillion yen in 2018. This marks an increase of 2.1%, but growth has slowed from the 5.5% increase recorded in 2017.The main factor is the cycle of systems renewals by large financial corporations. Investment in IT is expanding, but there is no significant growth in overall capital investment. According to a survey by the Ministry of Internal Affairs and Communication, US investment in computers and communications equipment, software and other IT sectors, reached USD 560 billion in 2015, four times the amount in Japan. While the US has grown 2.8 fold since 1994, Japan’s 11% growth is like water splashed on a hot stone. The difference in the level of investment can be seen in companies prioritising necessary investment for the long term. The Japan Electronics and Information Technology Industries Association (JEITA) survey of

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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2017 found that the number of Japanese companies increasing IT investment in products and services was stuck at 24%, whereas previous surveys of US companies was over 40%.

METI warns that by the time of the cliff edge in 2025, basic support for the top-selling European SAP Enterprise Resource Planning (ERP) system will be withdrawn. In the coming seven years to that point, many companies will have to think seriously about mission critical systems.

Edgecross consortium reaches 1,000 license sales and 200 members The Edgecross consortium reported accumulated sales of 1,000 licenses at the end of October 2018. The consortium started sales on May 8, 2018, and by October 26 had released a version with data modelling functionality. Its main customers are makers of automobile parts, beverages, domestic appliances, materials and equipment; manufacturers, equipment manufacturers, etc. It is used for managing quality control of production, operations management, preventive maintenance of production facilities, and helps manufacturers to increase the value of their in-house operations.

The consortium is also active in approaching marketing and technical departments to promote IoT, and is involved in the government initiatives Society 5.0 and Connected Industries.

Since the consortium was established between the six partners Advantec, Omron, NEC, IBM Japan, Oracle Japan and Mitsubishi Electric, the number of members has grown beyond expectations, and now numbers 208 corporate members as of October 9. Three hundred new members joined in FY2018, and it is considering expanding to China, Taiwan and other overseas locations. (Edgecross, 14.11.2018)

THK, Docomo, Cisco, join IoT manufacturers alliance for failure alert service THK, NTT Cocomo and Cisco Systems announced on October 18 that they will start a joint IoT failure alert service in the Spring. With the service, a sensor placed on the router issues an alert by simply turning on the power, with no need for complex network construction. It is developed for factories with direct acting parts. Negotiations have already started towards a free trial with 50 companies in February 2019.

At a press conference on October 18, THK CEO Akihiro Teramachi said the objective is to use the service without a systems integrator. He emphasised ease of use for small and medium enterprises and factories without dedicated IT technicians. THK’s LM guide will be the first direct acting part to be added to the service. THK will connect a sensor and amp attached by cable to the part. Its own proprietary software will analyse the data collected, digitising the status of wear and tear. The technology uses an amp to transmit the data to the Cisco router, which is constructed with a data center function. Docomo provides a secure global network.

The sales price and business model are still to be determined. Mr. Teramachi observed that the LM Guide has a 50% share of the global market, so “of course, we want to provide a useable service.” (The Nikkei Shimbun, 19.10.2018)

NTT to connect cars NTT announced on November 26 that it will start a car connectivity test with Toyota. Using cloud-based virtual space, this will be a test simulation on a scale of five million vehicles. The test data collection will be completed by 2020, and will be used to promote the adoption of automated driving. Toyota is cooperating with Softbank and KDD. Communications companies want to create an ‘all-round’ network. Automated driving is close to being realised, and next-generation 5G communications technology is being installed for testing. NTT calls 5G the core technology to support the connected car of the future.

Toyota is to emphasise “MaaS” (Mobility as a Service) and next-generation fields such as automated driving. Communications technology is indispensable for automated driving, and the three Japanese telecommunications companies are working together with Toyota towards its realisation. KDDI joined Toyota, with which it has a capital relationship, in a connected car initiative in 2016. Recently Softbank has partnered with Toyota in the field of automated driving. NTT announced the partnership in 2017, but the current announcement provides more details of the trial. Although the details of the cooperation are slightly different for the three telecommunications companies, the adoption of automated driving is just in front of us. (The Nikkei Shimbun, 28.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Industry Scenario

Automobile Industry

Eight car companies achieve 0.9% growth from April to September; China and Southeast Asia buoyant The eight passenger vehicle manufacturers who released production, sales and export figures on October 29 reported global production up approximately 1% at 14.3 million units in April-September period. Domestic output decreased, due to the influence of natural disasters and unease over test data irregularities, but Chinese production was robust, leading to an overall increase. However, production in China fell slightly in September, which may impact the second half results.

Domestic production slipped 0.1% to 4,385,000 vehicles. Exports rose 2% helped by higher demand for SUVs in the US, but were held back by adverse weather and inspection data irregularities.

Nissan and Subaru, where false data was recorded in pre-delivery tests, saw reductions of slightly more than 5%. For , affected by torrential rains in west Japan, the decline was 1.4%. Toyota’s production fell 2.8% due to the earthquake in Hokkaido in September. Overseas production rose by around 2% to 9,647,000 vehicles. By area, China increased 6% to 2.470,000; the US fell 4% to 1,767,000. China was robust for Toyota and , up 14.7% and 7.8% respectively. However, while there is a slight shift in Toyota’s production from Japan to the US , summer production at Nissan and was down.

Figures for September alone, show that overall production in China fell by 417,00 vehicles, a drop of 2%. The trade friction with the US is increasingly hindering sales of new cars. If the effect of the trade conflict is long lasting, it is possible that companies across the board will report sharply lower figures in the second half. (The Nikkei Shimbun, 30.10.2018)

Half-year production, sales, export at 8 car makers: April - September 2018

Domestic Overseas Company Export Domestic sales production production

1,493,335 2,894,947 925,315 740,848 Toyota Motor Corporation (-2.8%) (0.3%) (3.1%) (-4.3%) 446,372 2,220,218 259,591 284,591 Nissan Motor Co., Ltd.. (-14.4%) (-4.2%) (-18.1%) (0.5%) 415,491 2,180,539 82,843 346,395 Honda Motor Co., Ltd. (8.7%) (0.3%) (133.1%) (4.0%) 499,016 1,252,672 102,764 348,946 Motor Corporation (7.2%) (8.8%) (2.8%) (9.0%) 461,445 295,403 376,990 102,731 Mazda Motor Corporation (-1.4%) (-1.5%) (-4.9%) (6.7%) 316,402 358,816 210,363 47,648 Corporation (22.8%) (17.2%) (31.9%) (11.8%) 434,021 272,190 1 298,925 Daihatsu Motor Co., Ltd. (-3.6%) (62.2%) (0.0%) (-20.2%) 318,,927 172,578 254,394 67,420 (-7.9%) (-3.6%) (-6.2%) (-20.2%) Ujnit: Number of cars, (YoY %) (The Nikkei Shimbun, 30.10.2018)

Eight car companies increase global production 6.8% global production in October; 2.643,000 vehicles, first increase for two months The eight passenger vehicle manufacturers who released production, sales and export figures for October on November 29 reported global production up approximately 6.8% at 2,643,124 units, the first increase for two months. Daihatsu, Nissan, Honda, Mazda, Suzuki and Subaru had their highest month on record in October. Output was higher domestically and overseas.

Domestic output increased 6.7% to 848,350 vehicles. Production at Toyota recovered from the effects of the typhoon and earthquake in Hokkaido in September, rising 4.3% to return to positive after two months. Production of the Mazda SUV CX-5 was, for the first time in 4 months, higher than the same month of the previous year. Daihatsu saw a partial improvement in its small car ‘Boon’ .

There was a 6.9% increase in overseas production, at 1,820,289 vehicles. In China there was buoyant output of sedans such as Nissan’s Sylvie and Honda’s Accord. Mitsubishi Motors increased production

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 11 in of its Triton pick-up truck. However, the torrential rain in western Japan caused delay in delivery of parts to its plants in Mexico, leading to the fourth consecutive monthly decline.

Export volume rose 4.2% to 449,730 units. US exports of Honda Civic Sedan continued to be robust, reporting a large rise. Exports to China of Toyota’s luxury brand Lexus were also strong. (Nikkan Kogyo Shimbun, 30.11.2018)

Denso takes multi-million stake in major German semi-conductor maker announced on November 26 a large investment in German semi-conductor maker Infineon Technologies. The investment is valued at several billion Yen, and gives Denso a 0.2% stake. As cars become increasingly automated, Infineon’s semi-conductors and Denso’s in-vehicle appliances will combine, accelerating technical development. Denso is positioned as a key device maker for next- generation vehicles as systems take on greater scale, complexity and scope. The combination of Denso’s abundant experience and knowledge will deepen its ties with semi-conductor makers and strengthen research. Infineon brings strength in electric propulsion semi-conductors, known as Source: shutterstock_473537581 ‘power semi-conductors.’ There is growing demand for these power conductors in EVs. Denso and Infineon already have a trading relationship and the investment is will strengthen their ties. (The Nikkei Shimbun, 27.11.2018)

Minebea to acquire U-Shin in 32 billion yen, expanding presence in car parts MinebeaMitsumi announced completion of a TOB agreement under which car door parts maker U-Shin will become a wholly-owned subsidiary. Under the agreement, MinebeaMitsumi will buy each U-SHin share for ¥985. The total value of the acquisition is estimated at 32.6 billion yen. The purchase is being funded from cash reserves.

At the origin of U-Shin’s takeover is a series of M&A dramas. In 2013 it bought the car key parts business of the French company Valeo, which had almost twice its turnover in the automotive business, for around 20 billion yen. The acquisition was talked of as a minnow swallowing a whale. Subsequent management failure was the main factor leading ultimately to a 9.6 billion yen loss in the period to November 2016. MinebeaMitsumi sees growth potential in the integration of mechanics and electronics, and approached U-Shin as a ‘white knight.’ MinebeaMitsumi had consolidated sales of 879 billion yen in the financial year to March 2018. Its automotive related sales accounted for 25% of this, at 130 billion yen. Its weakness is lack of direct trading relations with car makers. U-Shin’s consolidated sales in the year to December 2017 were 168.6 billion yen. It is strong in the car doors segment and is a first-tier supplier to car companies including Mazda and Volkswagen. (The Nikkei Shimbun, 8.11.2018)

Denso Yamagata scales up its factory expansion plans; new plan doubles its size Denso Yamagata announced in August that it will double the size of its factory at Iidemachi, Yamagata Prefecture. It plans to add a further 5 billion yen to its original 1 billion yen investment by 2020. In addition to sound components such as proximity alert signals, it also produces electronic components for vehicle-mounted ECUs. Denso Yamagata employs 410 people, and its annual turnover of 13 billion yen is among the largest in the prefecture.

The company changed its name from Marcon Denso in June. The company had targeted completion on a floor area of 10,900 square meters by March 2019, but with the extended plan, Phase 2 construction will start in April. The revised plan is scheduled for completion n October 2019 and will expand the total floor area to 21,300 square meters, four times the current surface.

The growing popularity of hybrid vehicles and EVs is stimulating demand for electronics parts. The factory will also take over some production from Anden Co. Ltd (based in Anjo, Nagoya), which is providing 80% of the capital investment. The new plant is planned to start production in February 2020. It forecasts whole year sales for the year to March 31 2018 at 4.5 billion yen. (The Nikkei Shimbun, 9.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Mitsubishi Heavy Industries to increase production of Rolls-Royce aero engines Mitsubishi Heavy Industries’ aircraft engine unit will increase production of low pressure turbine blades for the Rolls-Royce engine "Trent" series. It is investing in stages in the construction of a new 1,700 square meter plant. This will increase blade production capacity by 70% over the present levels. The total investment is reckoned in the range of several billion yen. With strong demand for commercial aircraft, the company aims to achieve sales of 200 billion yen, 2.5 times higher than FY 2017 by the mid 2020s.

The increased production will be blades used in the Rolls-Royce engines on the Boeing 787, the Airbus 350XWB and 330neo engine as well as the Pratt & Whitney (P & W) "PW1100G-JM" combustion chamber. Production of blades for the Trent series is outsourced to Mitsubishi Heavy Industries for internal processing, then to IHI and Hoden Seimitsu Kako Kenkyusho. Total output is estimated at 700,000 blades over the next two years, (expectation for FY2018 is around 600,000 layers)

On this occasion, Mitsubishi Heavy will expand its production capacity plant for internal processing. It will install 4 robots on its blade processing lines, growing its annual processing capacity from from 144,000 to 240,000. Output of the combustion chamber will increase from 280 to 400. Production of both will be in full operation within 2019. The blade plant uses RFID (radio frequency identification tags) to gather production data, AI and IoT for data analysis; and accelerated sensors will be used to detect any abnormality instantly. (Nikkan Kogyo Shimbun, 26.10.2018)

Panasonic doubles EV drive systems capacity; full production eyed for 2020 has developed a next-generation drive system for small electric vehicles, integrating motors and inverters. It optimizes the design and cooling structure of the motor and increases the output to 18 kilowatts, a two-fold increase on the company’s current system. It also reduces, the number of parts, creating more passenger compartment space and extending the range. Panasonic will propose the system to makers of small EVs, and aims to have the system in volume production around 2020.

The next-generation system integrates the motor, inverter, DC/DC converter, and charger into one unit, giving a 48-voltage power charge. Compared to mounting the parts individually, the unit has the advantage of reducing size and weight. The design enhances the efficiency of the motor and uses air-cooling to deliver high performance.

Until now, it was necessary to install another unit integrating the motor and the inverter to deliver the output achieved by the new system. The next-generation model achieves a dramatically smaller profile, reducing volume by 10 liters - a 50% reduction - and weight by 29 kilograms, 35% less than existing systems. Source: shutterstock_657839185 (Nikkan Kogyo Shimbun, 30.10.2018)

Aisin Seiki merges two subsidiaries; restructures transmission business Vehicle transmission manufacturer Aisin Seiki, announced that it will merge its automatic and manual transmissions business units Aisin AW and Aisin AI in April 2019. AW will be the successor company. AISIN Group introduced a virtual company (VC) system in April, 2017, to bring together a collaborative structure in order to combine individual assets and improve competitiveness, while utilizing the strengths and expertise of each group company.

While the global automotive industry continues to undergo major changes in the push toward electrification, AISIN Group aims to build a more competitive powertrain business by integrating the two companies in the Powertrain VC, with a target of overall optimization and efficiency in the transmission business. (Nikkan Koygo Shimbun, The Nikkei Shimbun, Pressrelease of Aisin, 01.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Electronics

Among the eight major electronics companies, five companies increase sales for April- September period On November 8, all 8 major electric companies announced their consolidated financhial results for the April-September period. Five of the eight companies posted an increase in operating income. and reported record highs. However, in the ended March 2019, there is also uncertainty such as a slowdown in capital investment in China triggered by trade friction between the United States and China.

On the same day, Toshiba announced financial results for the April-September period (US GAAP) decreased by 80.7% from the same period last year to 6.9 billion yen. The effect of emergency measures previos year such as reduction of bonuses has fallen. The consolidated financial forecast for the fiscal year ending March 31, 2019 was revised downward due to the expansion of restructuring expenses and the recording of losses due to liquidation of UK nuclear power subsidiary.

The financial forecast for the fiscal year ended March 31, 2019 was revised by three companies other than Toshiba. Sony's game business and music business are doing well, capturing the highest profits in the field. Mitsubishi Electric Corp. has undergone a deceleration of capital investment by its customers and has revised its operating profit downward. Sharp is lowering sales due to poor television sales in China, but expects profits to rise as reducing costs. (Nikkan Kogyo Shimbun, 09.11.2018)

Half-year earnings at 8 big electrical manufactureres : April - September 2018 Turnover Operating income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 44,918 94,000 3,445 7,500 Hitachi, Ltd. (2.6%) (0.3%) (13.6%) (4.9%) 41,363 87,000 4,345 8,700 Sony Corporation (5.5%) (1.8%) (20.1%) (18.4%) 40,081 83,000 1,952 4,250 Panasonic Corporation (3.9%) (3.9%) (-0.7%) (11.7%) 21,701 83,000 1,259 3,050 Mitsubishi Electric Corporation (2.8%) (4.0%) (-17.6%) (-6.9%) 18,345 39,000 952 1,400 , Ltd. (-4.6%) (-4.8%) (340%) (-23.3%) 17,779 36,000 69 600 Toshiba Corporation (-5.1%) (-8.8%) (-80.7%) (-6.4%) 13,364 28,300 138 500 NEC Corporation (3.8%) (-0.5%) (90.1%) (-21.7%) 11,290 26,900 470 1.120 (1.2%) (10.8%) (15.9%) (24.3%) (Nikkan Kogyo Shimbun, 09.11.2018)

Revising full-year forecasts, seven electronics components companies improve as vehicle-mounted market strengthens Of seven electronics components firms which released April-September period results on November 7. six companies revised upwards their revenue and profit forecasts for the full year ending March 31, 2019. All of the companies reported improved market conditions in the six months from April to October, and this trend is expected to continue. On the other hand, there are sharp differences in the smartphone sector. While the companies receive a lot of enquiries for higher performance features, market growth is flattening and some companies are experiencing lower sales. There are widely differing expectations on how the smartphone market will perform in the second half (Nikkan Kogyo Shimbun, 08.11.2018)

Source: shutterstock_102333718

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Half-year earnings at 7 big electrical component manufactureres : April - September 2018 Turnover Operating income Company April-September Full year ending April-September Full year ending half March half March (results) (forecast) (results) (forecast) 8,006 16,500 826 1,540 Corporation (8.4%) (4.6%) (19.2%) (69.8%) 7,883 16,200 1,394 2,750 Murata Manufacturing Co., Ltd. (27.2%) (18.1%) (38.7%) (68.4%) 7,776 16,000 982 1,950 NIDEC Corporation (8.6%) (7.5%) (20.1%) (-16.9%) 7,219 14,200 621 1,200 TDK Corporation (15,8%) (11.7%) (40.6%) (-33.8%) 4,493 9,400 339 850 Minebea Mitsumi Inc. (3.8%) (6.6%) (-18.1%) (23.4%) 4,233 8,790 301 660 Co., Ltd. (3.2%) (2.4%) (-1.3%) (-8.2%) 2,108 4,200 353 620 ROHM Co., Ltd. (5.2%) (5.8%) (18.8%) (8.8%) (Nikkan Kogyo Shimbun, 08.11.2018)

Toshiba to build new lithium ion battery plant in Yokohama in 16.2 billion yen investment Toshiba has formally announced it will increase its production capacity of lithium ion batteries used in trains and cars. The new plant, to be constructed within the Yokohama city limits, represents an investment of 16.2 billion yen. It is expected to increase production capacity by 50%. Operation is planned to start in October 2020. Lithium ion batteries can be rapidly charged and have longer usable life. Demand is rising domestically and internationally leading to higher earnings expectations.

The new factory will be a three-floor construction with a ground area of over 27,000 square meters on the Toshiba Infrasystems Yokohama site. The company has current monthly production capacity of approximately 1 million cells at its Kashiwazaki plant in Niigata Prefecture but cannot keep up with the growth in demand, hence the decision was taken to open new facilities. Current annual sales are around 20 billion yen. It is thought that the decision, announced in November, will be a new revenue stream in the next medium-term business plan.

Globally, demand for lithium ion batteries is growing in a wide range of fields such as automobiles in response to increasingly stringent environmental regulations. Toshiba's "SCiB" has been adopted by Suzuki and Mitsubishi Motors as well as Tokyo Metro and JR West Japan. It is mounted in passenger electric vehicles (EV), buses and other vehicles in Europe, and the company intends to expand its industrial use such as in factory on-site vehicles in the future. (The Nikkei Shimbun, 18.10.2018)

Restrained investment in semi-conductors Several semi-conductor makers lowered their earnings forecasts for the financial year to March 2019 due to delayed capital investment by all the manufacturers of semi-conductor machinery. Nonetheless, the business environment was positive for all semi-conductor makers due to the overall background of continuing long-term growth in demand related to IoT and AI becoming widely adopted, (Supercycle). (Nikkan Kogyo Shimbun, 13.11.2018)

Earnings forecasts for the FY 2019 at 3 big semiconducting device manufactureres Turnover Operating income Company (mio. Yen) (mio. Yen) 1,280,000 309,000 , Ltd. (13.2%) (9.9%) 265,000 53,000 Corporation (27.9%) (220%) 115,600 31,400 DISCO Corporation (-9.0%) (-21.9%) (The Nikkei Shimbun, 18.10.2018)

Sony: Investment 600 billion yen for semiconductor Sony is investing in semiconductor business such as smartphones and image sensors to be installed in automobiles, investing 600 billion yen in 3 years until the fiscal year ending March 2021. The investment amount will be increased by 30% compared to the three years until the fiscal year ended March 2018, and the production capacity is expected to increase by 20 to 30%. Continuing to smartphones, auto- driven vehicles and markets for IoT are expected to be launched, securing initiative with large investment. VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 15

Sony produces image sensors at Nagasaki, Kumamoto, Yamagata and other plants, making up around 50% of the world market. The current production capacity is 300 milliwafer conversion, about 100,000 pieces per month. Investment is devoted to improving the efficiency of facilities and introducing new production facilities. Semiconductor-related capital expenditure for the three years to the year ended March 2018 amounted to about 460 billion yen. Initially, Sony planned to invest same scale even in the three years up to the fiscal year ending March 2021, but it seems to have decided that it is necessary to add 100 billion yen extra scale to respond to the demand expansion (The Nikkei Shimbun, 30.10.2018)

Canon produces complex geometrics on 3D printer Using its proprietary ceramic materials, Canon announced on November 27 that it has developed a technology to produce high precision complex ceramic parts on 3D printers. Complex or hollow structures, which can be hard to mold or cut on metal 3D printers, can be reliably produced on a ceramic 3D printer with the new technology, which uses the selective laser melting (SLM) method used in metal 3D printers and combines it with alumina ceramics material. The technology also makes it possible to produce porous and complex ceramic structures reliably on a 3D printer. For example, in creating honeycomb shapes with hexagonal hollows and a diameter of approximately 19 mm, parts can be produced with high accuracy with differences in external dimensions before and after the annealing stage of less than 0.8 percent. (Nikkan Kogyo Shimbun, 28.11.2018)

NEC ‘smart street-light’ NEC has developed a trial multifunctional 5th generation communication (5G) era ‘smart street light.’ The system combines street lighting with cameras, digital signage, speakers, and other communications channels in a tower type body with antennas and communication devices. It will autonomously collect data where it is installed, and analyse it using AI. It is expected to contribute to urban convenience and safety.

Softbank 5G validation In a demonstration to the media on October 25, Softbank presented its “Handover” validation trial, in which terminals installed in two moving vehicles used 5G communications to exchange base station information. The company also renewed its "5 G × IoT Studio" facility (Koto Ward, Tokyo), and presented it to the media on November 30. The studio allows companies considering adopting 5G to verify the technology using experimental equipment. The facility shows cases studies of how AI can be used in manufacturing, entertainment, retail and other sectors, demonstrating how AI and 5G can be combined to meet wide-ranging needs.

Fujitsu and Ericsson in strategic 5G partnership Fujitsu and Ericcson have entered an agreement to deliver end-to-end 5G network solutions and related services under a strategic partnership. The two companies are joining forces to develop this technology based on their combined portfolios — spanning radio access and core network — for the dynamic 5G market in Japan, connecting communications service providers to the global 5G ecosystem.

The two companies aim to initially provide systems and solutions for the Japanese market, and to further expand their collaboration to other customers globally. （Pressrelease: Fujitsu, 26.10.2018）

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Chemicals & Pharmaceuticals

Four of six major chemical manufactures increased operating income Among the six Japan’s major chemical manufacturers in the consolidated settlement of accounts for the period from April to September 2018, four companies posted an increase in operating income. While some of the market conditions were declining, earnings differed due to the ability to earn major business. In the Middle East situation such as Saudi Arabia, raw fuel prices are not stable and there are many concerns about the negative impact on raw material demand, which is steady due to the US-China trade friction. The booming economy of the past two years seems to have reached the corner.

Half-year earnings at 6 big chemical manufactureres: April - September 2018 Turnover Operaion income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) Mitsubishi Chemical Holdings 19,220 40,400 1,202 2,130 Corporation (6.5%) (8.5%) (19,6%) (0.6%) 11,221 24,900 614 1,300 Co., Ltd. (7.9%) (13.7%) (-20.2%) (-2.8%) 10,414 22,100 784 1,600 Corporation (8.0%) (8.2%) (11.4%) (-6.0%) 7,209 15,400 417 800 Chemicals, Inc. (16.1%) (15.9%) (9.4%) (11.8%) 4,244 8,800 416 710 Corporation (8.4%) (6.9%) (3.4%) (-20.0%) 3,482 7,400 123 350 , Ltd. (6.5%) (6.4%) (-21.7%) (-3.7%) (Nikkan Kogyo Shimbun, 05.11.2018)

Domestic ethylene production increased 1.2%, and PVC-prodction 7.7% in October According to the announcement by the Japan Petrochemical Industry Association (JPCA) on November 22, domestic ethylene production in October was 552,600 tons, an increase of 1.2% compared with the same month the year before. According to the supply and demand results announced by the Vinyl Environmental Council (VEC) on November 21, the total shipment volume of PVC resin in October increased by 11% (YoY) to 158,100 tons in October. Domestic shipments of PVC increased by 4% to 94,700 t, which was a high figure exceeding 95,000 t since March 2014. Exports increased by 23% to 60,800 tons, exceeding 60,000 tons since March 2010. Total shipments turned the first positive in nine months in domestic shipments and strong exports, shipping higher than 155,000 tons since March 2010. (Nikkan Kogyo Shimbun, 22-23.11.2018)

The forecast of 7 major paper companies: Covering the slump in the domestic market with overseas demand The forecast of consolidated business for 7 major paper companies for the fiscal year ending March 31, 2019 is a companywide increase in revenue, compensating for the decline in domestic paper demand due to sales of cardboard and functional materials overseas. On the other hand, soaring raw material and fuel prices, such as used paper and heavy oil, put pressure on profits, and it seems that there will be 5 ordinary income. Five companies will raise the price to secure profits against the soaring raw fuel. (Nikkan Kogyo Shimbun, 14.11.2018)

Half-year earnings at 7 big paper manufactureres: April - September 2018 Turnover Operaion income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 7,618 15,500 546 1,100 Oji Holdings Corporation (6.1%) (4.3%) (210%) (55.4%) 5,255 10,800 117 200 Co., Ltd. (2.3%) (3.2%) (230%) (13.5%) 3,205 6,620 151 230 Rengo Co.,Ltd. (8.5%) (9.3%) (210%) (34.6%) 2,576 5,500 78 180 Daio Paper Corporation (1.9%) (3.5%) (290%) (62.7%) 1,348 2,750 19 100 (1.8%) (2.2%) (-57.5%) (-12.4%) VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 17

1,002 2,050 -9 15 , Ltd. (0.8%) (1.7%) (-) (-16.2%) 392 800 17 31 Tokushu Tokai Paper Co., Ltd. (-1.1%) (1.2%) (-8.9%) (-21.2%) (Nikkan Kogyo Shimbun, 14.11.2018)

AGC Develops a Synthetic Fused Silica Glass Antenna for 5G AGC Inc. has succeeded in developing a synthetic fused silica glass antenna for 5G that realizes both transparency and low transmission loss. The company plans to continue research and development aimed at practical use applications that include vehicle-mounted, indoor and outdoor antennas, and begins providing samples in 2019. The AGC Group positions the mobility and electronics business as key strategic business area in the long-term management strategy " Vision 2025". In particular, AGC regards the practical application of 5G to be a major business opportunity, and accordingly has focused efforts on developing glass antennas that add wireless base station capabilities to existing windows or can be used as glass-mounted antennas for connected cars; increasing the production of fluoropolymers for printed circuit boards; and acquiring a US-based business in the printed circuit board rigid CCL (Copper Clad Laminate) sector. (AGC Press Release, 29.11.2018, Nikkan Kogyo Shimbun, 30.11.2018)

Source: shutterstock_599621528

Osaka Titanium Technologies: Withdraw from polycrystalline silicon (polysilicon) business On November 28, Titanium Technologies Co., LTd. announced that it will withdraw from polycrystalline silicon (polysilicon) business for semiconductors. Long-term supply contract for SUMCO of silicon wafer manufacturing will be lifted. As the business environment deteriorated due to oversupply worldwide and it is unlikely that profitability improvement will be expected, we abandoned business continuity. (Nikkan Kogyo Shimbun, 29.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Ｓｔｅｅｌ

Crude steel production, down by 4.5% to 85,600 tons in November, Influence of production trouble Domestic crude steel production in November, released by the Japan Iron and Steel Federation on December 20, was 8,657,900 tons, a decrease of 0.5% compared to the same month of the previous year, falling below the previous year for the third consecutive month. Domestic steel demand is steady, but there is a possibility that some iron and steel makers have suffered production problems. Crude steel production increased by 0.9% compared to October. As the impact of equipment damage due to natural disasters has decreased, crude steel production per day increased by 4.3% compared to the previous month. However, because the blast furnace trouble occurred at the East Japan Works, group company of JFE Steel ( City) and it is expected to reduce production by about 400,000 tons, crude steel production in December is likely to further decrease.

Looking at the production volume by furnace, converter steels decreased by 1% year on year to 6.41 million tons for the third consecutive month, the electric furnace steel increased by 0.8% to 2.24 million tons, the first positive in 3 months . (Nikkan Kogyo Shimbun, 21.12.2018)

Crude steel production converter furnace steel Crude steel production Electric furnace steel Unit: 1,000 metric tons Unit: 1,000 metric tons 9.500 14.000 9.000

12.000 8.500

10.000 8.000

8.000 7.500 7.000 6.000 6.500 4.000 6.000

2.000 5.500

0 5.000 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 2017 2018

converter furnace steel Electric furnace steel Crude steel production

Source: The Japan Iron and Steel Federation

Financial results of steel companies in the April-September period, oppression in disasters and accidents Three major steel maker finished in the consolidated settlement of accounts for the period from April to September 2018. Successive natural disasters and repeated equipment troubles and accidents have become the weight of recovery of major steel companies. Production / shipment volume declined due to heavy rain in western Japan and typhoon, or equipment trouble. (Nikkan Kogyo Shimbun 05.11.2018)

Half-year earnings at 3 big steel makers: April - September 2018 Turnover Operaion income Company April-September Full year ending April-September Full year ending half March half March (results) (forecast) (results) (forecast) & Sumitomo Metal 29,034 62,000 867 … Corporation (5.8%) ( - ) (-13,3%) … 19,072 40,000 1,163 2,200 JFE Holdings, Inc. (10.5%) (8.7%) (20.5%) (-10.8%) 9,582 20,300 231 500 , Ltd. (5.6%) (7.9%) (-55.0%) (-43.8%) (Nikkan Kogyo Shimbun 05.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Production of aluminum rolled products in November, shipment of boards for vehicles 10.9% According to the announcement of the Japan Aluminum Association on 27th November, the shipment volume of rolled aluminum products in November 2018 was 174,477 tons, down 0.6% from the same month the year before. Shipment volumes have declined for 11 consecutive months. Although the shipment of boards for automobiles is good, shipments for can materials continue to be weak as a result of an increase in PET bottle coffee.

Demand for light aluminum was high due to the trend of weight saving of automobiles, which was 16,784 tons, an increase of 10.9%. It is the highest level in November with an increase for 10 consecutive months.On the other hand, boards for can materials fell by 2.7% to 31,994 tons, which was a negative 10th consecutive month. Exports of aluminium boards decreased by 3% to 16564 tons.

Extrusion products were up 4.1%, to 42,755 tons, for the second consecutive month, due to construction demand for demand for restoration of disaster work in the summer and demand of Tokyo Olympic and Paralympic Games in 2020. For automobiles, products for trucks fell by 6.4% to 12,158 tons, due to reaction of high demand bevor emission regulations reform in 2017. (The Nikkei Shimbun, 29.11.2018)

Half-year earnings at 3 big aluminium manufactureres : April - September 2018 Turnover Operaion income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 3,308 6,700 118 280 UACJ Corporation (9.6%) (7.3%) (-24.9%) (-4.1%) 2,453 5,100 141 320 Holdings Co., Ltd. (7.4%) (5.9%) (0.4%) (-7.0%) 1,813 3,750 … … Kobe Steel, Ltd. (Aluminium Div.) (4.0%) (7.3%) … … (Nikkan Kogyo Shimbun, 29.11.2018)

Operatiing income of 6 special steel companies decreased in the Apr.-Sep. period The negative impact of rising commodity and equipment prices has spread in the specialty steel industry. In the consolidated financial statements for half-year results from April to September 2018 of the seven major companies, the operating income and ordinary results of six companies excluding Hitachi Metals declined.On the other hand, the shortage of high tension bolts (high tension bolts) connecting steel frames of buildings has become a challenge for the construction industry.

Construction related to the Tokyo Olympic Games and Paralympic Games and urban redevelopment progresses, while the special steel wire as the base material becomes short, production can not catch up with demand. The trading prices climbed strongly by over 10% in half a year. Concerns have arisen that the shortage of bolts may cause water for construction. (Nikkan Kogyo Shimbun, 15.11.2018)

Half-year earnings at 3 big special steel manufacturers : April - September 2018 Turnover Operaion income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 5,189 10,200 330 730 Hitachi Metals, Ltd. (7.6%) (3.2%) (2.8%) (12.1%) 2,696 5,510 167 350 Daido Steel Co., Ltd． (11.8%) (9.1%) (-10.5%) (-3.4%) 1,237 2,551 55 100 Aichi Steel Corporation (8.7%) (8.0%) (-20.7%) (-15.4%) 897 1,850 58 100 Sanyo Special Steel Co., Ltd. (18.0%) (17.5%) (-11,9%) (-8,8%) 631 1,340 8 35 Mitsubishisteel MFG. Co., Ltd. (9.0%) (12.8%) (-52.3%) (8.7%) 206 435 4 10 Nippon Koshuha Steel Co., Ltd. (4.3%) (10.3%) (-42.3%) (-12.9%) 100 201 11 23 Tohoku Steel Co., Ltd. (1.0%) (-1.5%) (-12.8%) (-8.2%) (Nikkan Kogyo Shimbun, 15.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Production of copper products increased by 2.7% in October for the first time in 5 months The Japan Copper and Brass Association (JCBA) announced on November 28 the production volume of copper products in October . According to the report, the production of copper products rose 2.7% from the same month last year to 73,400 tons, the first exceed YoY in five months, exceeding the previous year's results,. Demand for smartphones was sluggish, but for automobiles it was robust.

Among the stainless steel products, domestic sales increased by 2.0%, exports also increased by 6.3% to Southeast Asian countries and China. Copper stripes increased 3.5% in major items. Each manufacturer responded by making production more efficient without doing capital investment.

Copper pipes for air conditioner use increased by 3.5%. In addition to cars, the brass strips for white goods appliances also increased by 14.5%. Meanwhile, the brass strip decreased by 14.4% due to the delay in the production of a new model by overseas major smartphone manufacturers. (The Nikkei Shimbun, 29.11.2018)

Forecast for 8 non-ferrous metalmakers, 6 companies revised downward Among the eight non-ferrous metals major companies, six companies revised downward the consolidated earnings forecast for the fiscal year ending March 2019, the ordinary profit or profit before tax based on IFRS. The influence of the US-China trade friction on the global economy became a concern, and the fall in metal prices such as copper and zinc put pressure on the profit of each company's smelting and mining businesses.

Half-year earnings at 8 big non-ferrous manufactureres: April - September 2018 Turnover Operaion income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 8,552 16,600 275 530 Corporation (17.9%) (3.8%) (-24.4%) (-27.2%) JX Nippon Mining & Metals 5,175 10,200 406 650 Corporation (14.8%) (5.3%) (39.7%) ( - ) 4,666 9,090 … … Sumitomo Metal Mining Co., Ltd. (6.0%) (-2.2%) … … 2,506 5,067 92 245 Mitsui Mining & Smelting Co., Ltd. (3.4%) (-2.4%) (-52.4%) (-50,5%) 2,218 4,550 93 245 Co., Ltd (1.2%) (0.1%) (-36.2%) (-20.8%) 862 1,740 39 70 Furukawa Co., Ltd. (7.7%) (3.8%) (-1.0%) (-10.5%) 584 1,210 -21 13 Zinc Co., Ltd. (-8.4%) (-9.4%) ( - ) (-90.1%) 593 1,190 46 80 Nittetsu Mining Co.,Ltd. (5.8%) (-0.2%) (-0.9%) (-8.6%) (Nikkan Kogyo Shimbun, 13.11.2018)

Nippon Steel Sumikin investment 92 billion yen for improvement due to aged deterioration such as Muroran blast furnace etc. Nippon Steel Sumikin announced on November 2 that it will repair the steel works in Hokkaido and . The total investment amount is about 92 billion yen. The 3-year medium-term management plan which wll be finished in March 2021 to strengthen competitiveness by expanding investment in domestic steelworks, and this investment will be part of that.

The furnace scheduled for renovation is No. 2 blast furnace at the Hokkai Steel Work in Muroran which refurbished and operated in 2001 Works and the 3rd coke oven at the Nagoya Ironworks Plant, which is closed from 2013. About 35 billion yen will be invested in the 2nd blast furnace at Hokkai Steel Work and the latest system utilizing IT etc. will be introduced. The volume of the furnace is also expanded, and it will be able to deal with high value added products. Approximately 57 billion yen is invested in the third coke oven at the Nagoya Steel Works, and it is renovated over two years and it will be operated in the first half of 2021. The company plans to spend 1.7 trillion yen on domestic capital investment in the medium-term management plan, for renewal of aged facilities and equipment enhancement. (The Nikkei Shimbun, 02.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 21

Energy

Toshiba ESS and Senvion to cooprate in Japan Toshiba Energy Systems & Solutions Corporation and German wind turbine equipment manufacturer Senvion GmbH on October 29 announced that they signed a mutually non-exclusive strategic cooperation agreement for the distribution of onshore and offshore wind power generation systems. Through this collaboration, Toshiba ESS will sell Senvion's highly competitive wind power generation system in Japan, using the commercial distribution of Toshiba ESS. Toshiba's domestic network will be used for power generation equipment made by SENBION which brings product lineup on both land and offshore.

Toshiba is strengthening the renewable energy business by making use of "IoT" technology, etc. for solar power generation and wind power generation. Toshiba is strengthening the renewable energy business by making use of "IoT" technology, etc. for solar power generation and wind power generation.

Toshiba has been handled as a compact wind power generator until now, but will expand the business by adding the Senbion product. In addition, Toshiba's technologies related to storage batteries and electric power systems are tied up, and the ability to propose is enhanced. Meanwhile, Senvion has had a presence in Japan since 2003 and is actively expanding into the Asia- Pacific region. (The Nikkei Shimbun, 29.10.2018)

Finally, the law for offshore wind energy will come into force in April. The offshore new law promoting offshore wind development in the general sea area was decided by the Cabinet on November 6, 2018. The law was unanimously approved both at the Lower House plenary session on 22 November and at the Upper House plenary session on 30 November.

Based on the plan approved by the Ministry of Land, Infrastructure and Transport, the period of permission to occupy is assumed to be 30 years maximum, supplementary resolution has been issued to consider existing fishermen and to secure removal cost after the project is over. The enforcement of this law is expected within 4 months (preparation time of ministerial ordinance etc.) so it will be in April 2019.

Panasonic: commercialize hydrogen fuel cell generator Panasonic Corporation announced on November 1. in a press release that it will commercialize "hydrogen fuel cell generator" in April 2021.

In May 2009 in Japan, Panasonic became the first in the world to start selling residential fuel cells that generate power from hydrogen extracted from natural gas. It was followed by the company's consistent efforts to achieve improved power generation endurance time, downsizing, enhanced efficiency, improved ease of installation, the addition of a resilience function, and cost reductions. As a result, the cumulative production quantity exceeded 140,000 units. Based on this achievement, the company has also been working to develop hydrogen fuel cell generators and conducting field tests since 2016 by participating in such projects as the Yume Solar Kan Yamanashi in Yamanashi Prefecture and Shizuoka Hydrogen Town in Shizuoka Prefecture.

The hydrogen fuel cell generators to be commercialized will have a power generation output of 5 kW and are expected to be used at hydrogen stations, commercial facilities, etc. Linking the operations of these generators will also enable the adjustment of output in accordance with the scale of facilities.

Panasonic is currently developing hydrogen fuel cell generators and plans to deliver them to HARUMI FLAG, the Type 1 Urban Area Redevelopment Project undertaken by the Tokyo Metropolitan Government in the Harumi 5-chome West District. （Pressrelease: Panasonic, 01.11.2018）

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 22

General Industry Development

Machine production increased by 2.9% this fiscal year to 77 trillion yen, domestic market stay solid On November 21, the Japan Machinery Federation (JMF) went public the "2018 Machine Industry Production Forecast Survey" summarizing the domestic production trends of the eight domains such as general machinery, electric machinery and transport machinery. The domestic production of machinery industry in fiscal 2018 is expected to continue to recover. While domestic growth is gentle, it can be expected to continue investment for labor-saving and factory automation cause of shortage of human resource. Farther more, investment for infrastructure development such as transportation and logistics to hold the Olympic Games are expected.

Overseas, the stability of exchange rate contributes to production increase. In the United States, the economy is expected to continue steadily due to the policy effect of cutting corporate income tax. In Europe, the moderate economic recovery continues, and in China, it can be expected through national EV policy increasing investment for labor saving and automation due to semiconductor-related demand.

On the other hand, it is nesseary continuously to watch the impact of the US protectionist trade policy on the trade trends in Japan, in China or other countries, the oil prices in the upward trend, geopolitical risks on raw materials and resources etc. Under such situations, the total amount of machinery industrial production in FY 2018 is expected to be 77.1 trillion yen, an increase of 2.9% from the previous year. (Nikkan Kogyo Shimbun, 22.11.2018)

bn. Yen Trend of machinery production in Japan

80.000 Castings and Forgings 70.000 Metal products 60.000 Precision Instruments/Mesuring 50.000 Instruments Transport equipments 40.000

Electrical components / devices 30.000

20.000 IT / Communication equipment

10.000 Electrical machinery

- General machinery 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: JMF

bn. Yen Trend of machinery production and export 80.000

70.000

60.000

50.000 Production Export 40.000

30.000

20.000 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: JMF

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 23

Industrial machinery orders for April-September increased by 2% to 2,414.1 billion yen The Japan Society of Industrial Machinery Machinery orders Manufacturers (JSIM) announced on Apr.-Sep. November 12 results of industrial machinery Y-o-Y rate (mio. Yen) orders from April to September, 2018. Boiler,Prime Movers 510,222 -14.6% According to it, orders for industrial Mining Machinery 8,975 -15.4% machinery orders increased by 2.2% from Chemical Machinery 722,635 16.6% the same period of the previous year to 7,338 25.4% 2,414.1 billion yen, which increased for the Tanks second consecutive year as the first half of Machinery 136,609 2.9% the year. Domestic demand increased by Pump 179,457 0.5% 3.3% to 1,646.7 billion yen, while foreign Copressor 140,787 7.8% demand increased by 0.01% to 766.3 billion Fan, Blower 12,544 0.8% yen, both of which exceeded the first half Material Handling Machinery 237,524 10.6% results of the previous fiscal year. Power Transmission Equipment 22,638 2.6% Metal processing Machinery 80,988 4.6% Among domestic demand, the manufacturing Others 353,431 -1.3% industry grew by 3.3% year on year, non- Sum 2,413,148 2.2% manufacturing industries increased by 7.0%, and private demand totaled 1.11 trillion yen, Machinery orders for an increase of 5.0%, for two consecutive export years. Public demand decreased by 3.4%, Apr.-Sep. Y-o-Y rate agency sales increased by 7.6%. Meanwhile, (mio. Yen) the export contract performance of the main Boiler,Prime Movers 105,494 3.5% 70 companies decreased by 2.0% in the Mining Machinery 409 -34.9% half-year results from April to September to Chemical Machinery 85,922 -24.1% 692.5 billion yen, the first time in 2 years as Plastic Machinery 64,055 2.8% the first term. Exports to North America Environment Equipment 93,797 20.1% increased, but decreased to Africa and Material Handling Machinery 71,844 -6.6% Oceania. Power Transmission Equipment 4,480 1.7% Unitary machinery decreased by 0.7%. 19,802 8.2% Pneumatic & hydraulic machines with a large Metal processing Machinery growth rate are attributable to expansion in Freezing machiney 31,762 5.0% Asian market and European market. Others 74,396 6.9% (Nikkan Kogyo Shimbun, 13.11.2018) Sum as stand-alone products 551,931 -0.7% (Nikkan Kogyo Shimbun, 13.11.2018) Plant 140,605 -6.8% Sum 692,566 -2.0%

Sales of 9 major industrial tool trading companies increased in the Apr.-Sep. period All nine major industrial tool trading companies announced thier consolidated financial redults for the periode April - September 2018 on November 14. Sales of machine tools, tools, and production equipment due to demand for factory automation increased, with all nine companies increasing sales and operating income. As for consolidated business results for the fiscal year ending March 31, 2019, it is expected that demand for labor saving will continue due to shortage of manpower, and eight companies are forecasting higher sales.

Half-year earnings at 9 big industrial tool trading companies : April - September 2018 Turnover Operating income Full year ending April-September Full year ending Company April-September March 2019 half 2018 March 2019 half 2018 (results) (forecast) (results) (forecast) 2,622 5,200 85 170 Yamazen Corporation (9.7%) (4.4%) (28.4%) (10.5%) 2,263 4,800 52 127 Yuasa Trading Co., Ltd. (5.9%) (4.0%) (15.1%) (11.8%) 621 1,260 32 62 Nichiden Corporation. (7.1%) (5.3%) (9.5%) (3.6%) 513 1,043 16 37 Furusato Industries, Ltd. (8.3%) (5.5%) (37.7%) (18.4%) 533 1,065 28 47 Tsubakimoto Kyogo Co., Ltd. (14.7%) (8.0%) (72.5%) (37.6%) 215 477 9 17 Sugimoto & Co., Ltd. (1.8%) (7.8%) (12.2%) (-2.0%) 143 280 9 17 Toba, Inc. (3.2%) (-1.8%) (12.2%) (-2.0%) 119 239 6 9 Tomita Co., Ltd. (5.8%) (0.2%) (24.7%) (4.0%) 124 255 5 10 Cominix Co.,Ltd. (9.9%) (8.1%) (32.0%) (24.8%) (Nikkan Kogyo Shimbun, 15.11.2018) VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 24

Full year forecast of 21 machine tools manufacture, updated the highest profit 21 machine tools manfacture reported the consolidated financial result forecasts in the fiscal year ended March 31, 2019 (the two companies for the year ended December 2018) are conspicuous in updating the record high profits. Makino machine and Waida Mfg. renewed operating profit for the first time in 12 years, Takamatsu Machinery the first time in 11 years, Sodick (December term) for the first time in 13 years. Many companies updated their sales records in the fiscal year ended March 31, 2018, as they pushed up profits as sales of high-value-added machines, especially developed countries, grew. Despite the strong financial results, however, there is also a slowdown in orders due to the US - China trade friction.

Sales of Makino milling machine will be the highest ever for two consecutive years. Sales of high-value- added machines such as 5-axis control machining centers that efficiently and precisely process metal molds and automobile parts etc. were very well worldwide. DMG Mori Seiki has increased sales of five- axis machines, multifunction machines and other automation equipment together, and sales are about 500 billion yen. Okuma reaches sales of 200 billion yen, which is close to the record high record for the year ending March 2008.

Trends in local markets are strongly affecting companies strong in China sales. Tsugami has the highest sales for 2 consecutive years, operating profit for the first time in 6 years, but in the ordering side the local orders decreased conspicuously in October. While many companies have revised up their earnings forecasts for the fiscal year ended March 31, 2019, they have not changed their forecasts. (Nikkan Kogyo Shimbun, 19.11.2018)

Half-year earnings at 21 big machine tools companies: April - September 2018 Turnover Operating income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 687 FANUC Corporation (-23.6%) 1,003 2,030 122 265 (21.0%) (11.5%) (41.3%) (17.8%) 917 1,900 81 176 Makino Milling Machine Co., Ltd. (22.0%) (4.7%) (290%) (17.2%) 848 1,715 77 JTEKT Corporation (13.5%) (6.1%) (60.2%) 331 552 Brother Industries, Ltd. (-16.1%) (-27.4%) 353 750 68 140 Co., Ltd. (23.3%) (17.2%) (64.6%) (34.6%) 351 631 55 89 Tsugami Corporation (28.3%) (9.6%) (64.9%) (28.2%) 334 684 Komatsu NTC, Ltd. (23.1%) (8.7%) 267 612 38 Amada Holdings Co., Ltd. (16.1%) (22.2%) (14.9%) 139 300 11 24 Takisawa Machine Tool Co., Ltd. (13.5%) (3.4%) (84.9%) (2.7%) 118 270 1 11 OKK Corporation (-1.6%) (1.4%) (36.6%) (53.7%) 131 281 -3 1 Toshiba Machine Co., Ltd. (12.4%) (18.6%) (-%) (-%) 105 224 8 21 Takamaz Machinery Co., Ltd. (21.3%) (13.7%) (73.6%) (32.0%) 157 320 13 26 Okamoto Machine Tool Works, Ltd. (14.9%) (11.0%) (72.5%) (28.9%) 81 206 4 17 Enshu Ltd. (33.4%) (50.9%) (380%) (470%) 65 140 3 Fuji Machine MFG. Co., Ltd. (9.9%) (1.5%) (720%) 48 115 2 1 Howa Machinery, Ltd. (18.3%) (33.5%) (-%) (-%) 28 52 1 2 Hamai Co., Ltd. (13.2%) (0.3%) (-23.5%) (5.5%) 40 81 9 16 Waida MFG. Co., Ltd. (18.3%) (40.5%) (430%) (97.2%) 3,532 4,800 235 380 DMG Mori Co., Ltd. (16.5%) (11.7%) (57.9%) (29.3%) 625 800 82 100 Sodick Co., Ltd. (-%) (-%) (-%) (-%) (Nikkan Kogyo Shimbun, 19.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 25

Full year forecast of 6 cutting and grinding tools manufacture Six major cutting and grinding tools manufactures announced consolidated financial forecast for the fiscal year ending March 2019. Sales to major customers such as automobiles are strong, and five companies are anticipating higher sales. Many companies view strong demand both domestically and overseas. Due to the rise in raw material prices, there was last minute surge in demand. It is also actively investing in increasing production at factories.

Sumitomo Electric Industries' cemented carbide tool business is also well for semiconductors, robots and industrial machinery, in addition to its core automotive industry.The backlog of orders in the machine tool is also high level

Noritake is also expected to increase revenue and profit. Diamond tool dealers for Construction and civil engineering which made it a wholly owned subsidiary in April will contribute to increased sales. They anticipate continued strong performance for automobiles, which accounts for more than 60% of sales of grinding wheels.

Mitsubishi Materials reduced ordinary income such as cemented carbide tools to 17.4 billion yen, down 0.8 billion yen from the previous forecast. To respond to quality fraud problems at manufacturing subsidiaries such as automobile sintered parts. Sales of cemented carbide tools in the fiscal year ending March 2019 are expected to increase 10% from the previous term. (Nikkan Kogyo Shimbun, 20.11.2018)

Half-year earnings at 6 big cutting and grinding tools manufactures: April - September 2018 Turnover Operating income Company April-September Full year ending Full year ending April-September half 2018 March 2019 March 2019 half 2018 (results) (results) (forecast) (forecast) 872 1,769 99 183 Mitsubishi Materials Corporation (11.4%) (9.8%) (14.6%) (-1.1%) 532 1,069 Sumitomo Electric Industries, Ltd. (13.4%) (7.7%) 208 410 13 21 Asahi Diamond Industrial Co.,Ltd. (-4.8%) (-9.8%) (-22.7%) (-53.7%) 310 630 10 24 Noritake Co., Ltd. (5.4%) (6.1%) (28.9%) (38.0%) 51 103 4 5 DIJET Co., Ltd. (5.9%) (4.2%) (600%) (3.6%) 52 105 14 27 NS Tool Co., Ltd. (11.9%) (7.7%) (19.3%) (2.0%) (Source: Nikkan Kogyo Shimbun, 20.11.2018)

Full year forecast of 4 forging machine manufacturers, high raw material prices are concerned about profit In the consolidated earnings forecast for the year ended March 2019 of the four forging pressure machinery major companies, the rise in material costs and transportation costs squeezes profits. Sales of press machinery companies are expected to post orders for the previous term steadily, but there is concern that investment decisions due to US-China trade friction will be postponed. Sales of sheet metal working machines in Japan and North America have been favorable, and Amada Holdings' sales and current profits will be updated to record highs. (Nikkan Kogyo Shimbun, 16.11.2018)

Half-year earnings at 6 big forging machine manufacturers: April - September 2018 Turnover Operating income Company April-September Full year ending April-September Full year ending half 2018 March 2019 half 2018 March 2019 (results) (forecast) (results) (forecast) 1,545 3,300 203 430 AMADA Holdings Co., Ltd. (12.9%) (9.4%) (14.2%) (8.2%) 403 780 23 62 AIDA Engineering, Ltd. (23.1%) (5.6%) (-18.9%) (-1.0%) Komatsu, Ltd. 263 609

(Komatsu Industries Corporation) (-20.8%) (18.3%) 125 210 3 8 Hitachi Zosen Corporation (H&F) (8.7%) (-13.9%) (-40.0%) (-20.0%) (Source: Nikkan Kogyo Shimbun, 16.11.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 26

IHI plans construction of a new factory for the first time in 21 years, Civil aviation engine maintenance IHI Corporation have signed a land sales contract with Saitama prefecture, to set up a new production facility in Tsurugashima-City, Saitama Prefecture. In order to correspond with growing demand for engine maintenance, IHI have decided to set up a new Commercial Aero Engine maintenance shop, hereinafter called “new shop”, which is planned to commence operation by the end of 2019. IHI`s investment on production facility, will be for the first time in 21 years. Last investment was to set up a Works in Soma on 1998. (IHI Press release, Nikkan Kogyo Shimbun, 19.10.2018)

Ube Industries will establish a factory for injection molding machines and will be operational in July 2020 U-MHI Platech Co., Ltd., an UBE Group company, today announced that it has decided to lease a new manufacturing plant for injection molding machines. Mitsubishi Heavy Industries, Ltd. will build the plant on the grounds of its Oye Factory in the Minato Ward of Nagoya City, which U-MHI Platech will operate as its new manufacturing facility.

The Oye Factory, U-MHI Platech’s new plant, will be constructed on a roughly 18,000 square-meter plot situated near the Higashi Nagoyako Station on the Nagoya Railroad (Meitetsu). The construction will begin in December 2018 and is scheduled to be completed in March 2020. U-MHI Platech will transfer its operations from the current Iwatsuka Factory in the Nakamura Ward of Nagoya City to the Oye Factory in July 2020. (Ube Press Release, Nikkan Kyogyo Shimbun, 26.10.2018)

VDMA-Newsletter “Japan”, Edition 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office 27

Exhibitions

February 2019

Manufacturing World Japan 2019 • 30th Design Engineering & Manufacturing Solutions Expo [DMS] • 1st Aerospace Technology & Components Expols Expo [AeroTech] Name of the Exhibition • 23th Mechanical Components&Materials Technology Expo [MTech] • 1st Factory Facilities & Equipment Expo [FacTex] • 1st Industrial AI/IoT Expo • 1st Advanced 3D Printing Expo • 27th 3D & Virtual Reality Expo [IVR]

Date 06.02.2019 – 08.02.2019 Location Tokyo Big Sight URL https://www.japan-mfg.jp/en-gb.html Organizer Reed Exhibitions Japan Ltd. Visitor number 88,679 (including: 2,162 foreign visitors) Exhibitor number 25,22 (including: 408 foreign exhibitors)

Name of the Exhibition 11th Kawasaki International Eco-Tech Fair Date 07.02.2019 – 08.02.2019 Location Culttz Kawasaki (Kawasaki City Sports and Cultural Center) URL https://www.kawasaki-eco-tech.jp/english/ Organizer Kawasaki International Eco-Tech Fair Organizing Committee Visitor number 16,100 (including: 180 foreign visitors) Exhibitor number 131 (including: 4 foreign exhibitors)

Digital Inovation Tokyo 2019 Name of the Exhibition Cloud Days, Security, Block chain, Iot Solution, Business AI, etc. Date 19.02.2019 – 20.02.2019 Location The Prince Park Tower Tokyo URL https://expo.nikkeibp.co.jp/dinv/ex/ Organizer Nikkei Business Publications, Inc. Visitor number 14,459 Exhibitor number 146

MOBAC SHOW 2019 Name of the Exhibition The 26th Machinery, Materials, Marketing of Bakery and Confectionery Show

Date 20.02.2019 – 23.02.2019 Location Makuhari Messe URL http://www.mobacshow.com/index_e.html Organizer Japan Bakery and Confectionery Machinery Manufacturers Association MOBAC Show 2019 Commission Visitor number 35,846 (including: 2,912 foreign visitors) Exhibitor number 229

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28 Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office

5th INTERPHEX OSAKA 2019 – Name of the Exhibition International Pharmaceutical R&D and Manufacturing Expo Osaka Date 20.02.2019 - 22.02.2019 Location INTEX Osaka URL https://www.interphex-osaka.jp/en-gb Organizer Reed Exhibitions Japan Ltd.

Visitor number 9.475 Exhibitor number 182

Name of the Exhibition Medical Device Development Expo OSAKA (MEDIX OSAKA) 5th Int’l Medical and Elderly Care Expo & Conference Date 20.02.2019 - 22.02.2019 Location INTEX Osaka URL https://www.medical-jpn.jp/en-gb/about/outline/MEDIXK.html Organizer Reed Exhibitions Japan Ltd. Visitor number - Exhibitor number -

March 2019 Name of the Exhibition SECURITY SHOW 2019 (27th edition) Date 05.03.2019 - 08.03.2019 Location Tokyo Big Sight URL https://messe.nikkei.co.jp/en/ss/ Organizer Nikkei Inc. Visitor number 71,402 Exhibitor number 194

Name of the Exhibition RETAILTECH JAPAN Date 05.03.2019 - 08.03.2019 Location Tokyo Big Sight URL https://messe.nikkei.co.jp/en/rt/ Organizer Nikkei Inc. Visitor number 119,928 Exhibitor number 211

Name of the Exhibition LIGHTING FAIR Date 05.03.2019 - 08.03.2019 Location Tokyo Big Sight URL https://messe.nikkei.co.jp/en/lf/ Organizer Nikkei Inc.

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29 Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office

Visitor number 70,106 Exhibitor number 212

Name of the Exhibition N-EXPO (New Environmental Exposition) The 28th New Environmental Exposition 2019 Date 05.03.2019 - 08.03.2019 Location Tokyo Big Sight URL https://www.cphi.com/japan/ Organizer Nippo Business Co., Ltd. Visitor number 158,222 Exhibitor number 510

Name of the Exhibition InnoPack Japan 2019 Date 18.03.2019 - 20.03.2019 Location Tokyo Big Sight URL https://www.cphi.com/japan/ Organizer UBM Japan / UBM EMEA / The Chemical Daily Co., Ltd. Visitor number 19,509 Exhibitor number 550 (including: 387 foreign exhibitors)

Name of the Exhibition P-MEC Japan 2019 Date 18.03.2019 - 20.03.2019 Location Makuhari Messe URL http://grind-tech.jp/2019/contents_en/ Organizer UBM Japan / UBM EMEA / The Chemical Daily Co., Ltd. Visitor number 19,509 Exhibitor number 550 (including: 387 foreign exhibitors)

Name of the Exhibition MEDTEC Medtec Japan Electro Med Japan Smart Health Japan Care・Welfare Robot&Device Expo Test Kit Japan Date 18.03.2019 - 20.03.2019 Location Tokyo Big Sight URL http://www.medtecjapan.com/en Organizer UBM Japan Co., Ltd. Visitor number 31,062 Exhibitor number 560

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30 Japan Economic and Industrial Scenario, 06/2018 VDMA JAPAN Liaison Office

Name of the Exhibition Grinding Technology Japan 2019 Date 18.03.2019 - 20.03.2019 Location Makuhari Messe URL http://grind-tech.jp/2019/contents_en/ Organizer JAPAN INDUSTRIAL PUBLISHING CO., LTD. Fuji Sankei Business-i (The Nihon Kogyo Shimbun Co., Ltd.) Visitor number - Exhibitor number -

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31 Japan Economic and Industrial Scenario, 06/2018 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 06/2018 Contact: Oliver Wack, Telephone: +49 69 6603-1444