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Edition 01/2020

Production shutdown in China affecting Japanese manufacturers

The idling of Japanese production plants in China due to the outbreak of the new coronavirus has started to have a major impact on the Japanese economy as a whole. Many Japanese companies in the automobile, food and other sectors import materials and machinery from China. Teikoku Databank estimates that 19,718 Japanese companies import products from China. The Chinese cities with the largest concentration of Japanese companies were Shanghai with 2,010, Dalian with 741, Qingdao with 433, and Suzhou with 426. In addition, more than 30,000 Japanese companies conduct business with China.

According to a survey of 635 Japanese companies conducted by Shanghai Business and Industry Club on Feb-ruary 17, a majority of the companies had already faced supply chain problems. More than 90% of companies expect 2020 profits to be down from the previous year, and 20% of them expect a drop of 20% or more. Companies with involvement in China cannot escape the widening repercussions.

By industry, the largest concentration was Number of japanese companies in China manufacturing (5,559 companies), accounting 16.000 14.394 for about 40% of the total. Within manufacturing, 13.256 13.934 13.685 13.646 a large segment (131 companies) is involved in 14.000 metal working and manufacturing of pro-cessing 12.000 10.778 machines such as lathes, milling machines, 10.000 grinding machines for general industrial use. 8.000 The largest sector (227 companies) produces 6.000 capacitors, connectors and printed circuits used 4.000 especially in the manufacture of electrical ma- 2.000 chinery and electronic equipment parts. The manufacturing sector as a whole has declined - 2010 2012 2015 2016 2019 2020 2.4% since 2019, and is now about 5% smaller than at its peak in 2016 (5,853 companies). Source: Teikoku Data Bank

Many Japanese companies rely on imports of raw materials and parts from China, but for major automakers the interruption of supplies is a reason to reduce or suspend production. As at the end of February it was not clear when production would resume.

The largest concentration (9,054) of Japanese companies in China is in the eastern region of the country. The region includes Shanghai, the administrative area with the largest number of Japanese companies (6,300), and the third-largest Jiangsu Province (1,900 companies). Many Japanese companies active in China are concentrated in the Shanghai economic zone. The second largest regional concentration (2,252 companies) is the south-central, which includes Guangzhou, which has large port facilities, and Shenzhen, where high-tech industries are concentrated. By administrative area, Guangdong Province (2,036 companies) has the second-largest concentration of Japanese companies. Another large concentration is in Hubei Province, where 242 companies are operating.

JAPAN

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

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444 Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 2

Current Economic Scenario

Status of japanese carmakers in China to the spreading of COVID-19 infections The spreading coronavirus is having a prolonged and wide impact on Japanese carmakers’ domestic production. China accounts for 30% of parts imports to Japan, forcing carmakers to make changes. Furthermore, domestic new car sales in February (including sub-compacts) were 10% lower year-on-year. Production be held back if supplies continue to be interrupted, and a further decline in sales in March is quite possible.

Honda has informed its parts suppliers of revised production at its two factories in Yorii and Sayama, Saitama Prefecture. The company will reduce production by some hundreds of units over a number of days in early March. The company has Source: shutterstock_1634945863 three vehicle assembly plants in Wuhan, Hubei Province, China, and several parts companies are expanding in the region. Production at Wuhan is expected to resume after March 11, but inventories of China-made parts will be lower depending on the model.

Toyota partially returned to full operation at its passenger car plants in China on March 2. Despite sluggish growth due to the spread of the new coronavirus, the company was able to double production shifts from one to two at one of the three production lines at its Guangzhou plant. China production has steadily recovered, although the company did not disclose overall operational ratios for all Chinese sites. operates four plants in China in a joint venture with a local partner. All four factories had partially resumed production by February 24. The two plants in Tianjin, Jilin Province, which resumed on February 17-18, are still operating at half capacity. The Sichuan plant, which has a lower capacity volume than the other three factories, is operating at the same level as before the Spring Festival.

Nissan subsidiary Motor Kyushu (Kanda-cho, Fukuoka Prefecture) will suspend operations on Saturdays and Sundays in March, and for a whole day on March 6. The plant also suspended production for a total of four days in February and shortened operational hours. February’s suspension is estimated to have reduced output by several thousand vehicles. Nissan Kyushu produced 434,000 units in FY2018, accounting for about half of Nissan's total domestic production. A separate subsidiary, , will also suspend operations at the Shonan Plant (Hiratsuka City, Kanagawa Prefecture) for two days on March 3 and 7.

Mazda, unable to procure its usual parts from China, is postponing domestic production. Several models are affected. Some of its parts suppliers are in Hubei Province, and the company is considering alternative sources if the current situation continues.

Mitsubishi Motors is looking into temporarily replacing Chinese made parts with parts sourced in Japan and Europe for its Mizushima Plant (Kurashiki City, Okayama Prefecture). The plant is involved in production of Nissan sub-compacts, but the parts, which are sourced through Nissan procurement, are delayed. (The Nikkei Shimbun, 02.03.2020 )

Coronovirus keeps China production on edge; Komatsu supplying parts from outside China Komatsu: Komatsu has procured parts from its own factory in China and from cooperating manufacturers, but will switch some of its production to Japan and Vietnam. Several items are affected, including sheet metal used for con-struction machine bodywork and electrical parts known as wire harnesses.

Daikin: , which has an assembly plant for large-scale industrial air conditioning equipment in Wuhan, Hubei Province, has begun to consider alternative production in Malaysia and elsewhere. Its plants in Suzhou and Shanghai were partially reopened on February 10, but it is considering how to minimise the impact if production at Wuhan re-mains suspended for long. The company is able to produce compressors and other products in Japan and Thailand.

Meiko: Meiko, which produces electronic circuit boards for , has its largest production base in Wuhan. Its opera-tions were suspended, and it is considering switching production of parts with the same certification to multiple loca-tions in Japan, Guangzhou, Vietnam, and elsewhere. (15.02.2020) VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Canon: Canon Inc. announced on February 28 the suspension of operations at its five Kyushu factories that manu-facture cameras and related products from March 2 to 13. It is concerned about interruption of parts supplied from China due to the effects of the new coronavirus. The lost production will be re-scheduled within the year. The company hopes to maintain production efficiency when the parts supply stabilises.

Ricoh: The partial suspension of ’s production at some lines in Miyagi Prefecture has been extended for one week until March 6. The company is concerned about delay of essential parts for digital printing presses from China. (The Nikkei Shimbun, 28.02.2020)

Sharp receives government order for 150,000 masks per day Sharp has begun production of surgical masks intended to protect against the new coronavirus. The government’s emergency order is in response to the shortage of masks, and is the first time an order has been placed with a company outside the healthcare industry. Sharp will begin production at its Mie plant in mid March at a rate of 150,000 pcs per day. They will go on sale later in the month. Sharp will deploy a clean room at the plant which is normally used to pro-duce LCD displays. The company plans to start with three production lines, increasing eventually to ten lines and out-put of 500,000 pcs per day. The government has earmarked 10.3 billion yen from the contingency Source: iStock-1146906650_iStock.com_krblokhin fund set aside in the 2019 budget for emergencies, and will provide financial support to Sharp. Approved suppliers of masks are eligible for funding of up to about 30 million yen towards the purchase of mask-making machinery and equipment.

Before the outbreak of the new coronavirus, domestic production by manufacturers such as Unicharm - the largest - was around 20 million per week. The government support is expected to raise the capacity to around 100 million per week. Sharp's share is expected to be a few percent. (The Nikkei Shimbun, 28.02.2020)

“A year of change and challenge”,new year reception at Japan Machinery Federation Japan Machinery Federation (JMF), Chairman Hideaki Omiya (Senior Executive Adviser, Board Member, Heavy Industries) addressing a new year gathering of the JMF on January 8, talked of a year of change and challenge. Despite increasing uncertainty overseas, he pointed to positive factors such as the Japan-US Trade Agreement coming into force, and the government's policies to promote innovation. He emphasised his expectation that the machine industry will rise to the challenge of the year of change.

Specifically, he cited robot demonstration projects by the Robot Revolution Initiative Council (RRI) and the industry’s support for education. He also spoke of the progress in IoT- related projects Foto: VDMA Japan in cooperation with Germany and other countries. He also reported on the launch of the Manufacturing Global Value Chain Study Group, in response to many difficult issues such as the US-China friction and Japan-Korea relations. “We are starting to exchange opinions on the latest themes with academics, and to begin discussions on the sensitive issues.”

Ministry of Economy, Trade and Industry (METI), Manufacturing Industries Bureautor, Director-General, Shuzo Takada, spoke of the importance of responding quickly to change, particularly with regard to the digital revolution, environmental protection, and the ageing society, calling for new products and services to meet these challenges. Foto: VDMA Japan (Nikkan Kogyo Shimbun,09.01.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Government reports “Moderate recovery” continues in January; Middle East situation closely monitored The government maintained its judgment that the economy is in “moderate recovery” in its January monthly economic report. Domestic demand from personal consumption and public investment still appears to be solid. The government has used the phrase “moderate recovery” since January 2018.

Internationally, attention is again turning to the situation in the Middle East. Tension quickly intensified early in the year after an Iranian commander in Iraq was killed by a US air-strike. Although a full-scale armed conflict has been avoided, concern remains about the effect on crude oil prices. The Cabinet Office cautioned that real income will be negatively affected if the price of gasoline rises.

Judgement on China’s economic performance has been revised upwards to “continued moderate slowing.” This is the first upward revision in 39 months. China has announced that its 'real gross domestic product (GDP) in 2019 was 6.1% higher than last year. Although it is the second consecutive year of slower growth, the upward revision is based on some sectors of the manufacturing industry, such as automobiles, showing signs of having halted the decline.

In domestic demand, judgement on capital investment has been revised downward. Although there is moderate overall growth in R & D and software investment, weakness has been seen in capital expenditure and buildings in the non-residential sector. The latest cumulative figure for machinery orders in November 2019 was up, but this was due to the influence of large orders for rolling stock, and the general trend was weak. (The Nikkei Shikbun, 22.01.2020)

Organization for Small & Medium Enterprises and Regional Innovation (SMRI) promote BCP creation for SMEs Four organizations, such as The Organization for Small & Medium Enterprises and Regional Innovation (SME Support) and Shoko Chukin Bank have jointly established a “National council to support fo strengthen of SMEs”. It will work with business and industry groups nationwide in creating and strengthening business continuity planning (BCP) in SMEs. The BCP is premised on the impact a large scale disaster will have on the supply chain, and outlines planning not only by individual companies but across groups of several companies. In addition to providing financial and planning support, the council will promote human resource development through BCP seminars and other events held nationwide.

Industrial supply chains have frequently collapsed recently as a result of earthquakes, torrential rain and other natural disasters. Under a law enacted in July 2019 to promote business continuity, METI has introduced a certification system allowing SMEs to obtain tax incentives and other support for their disaster prevention and mitigation plans. About 4,000 plans have been approved under the certification system. (Nikkan Kogyo Shimbun, 20.01.2020)

SIMSOURCE establisched Japan subsidiary in Yokohama German software company and also VDMA Member company, SIMSOURCE GmbH has established a Japanese subsidiary, SIMSOURCE Japan, in Naka-ku, Yokohama. The company develops software for precision tools. The product information data provided by the tool maker will be provided to the tool user through the digital platform, and will play the role of the tool data provider for the tool manufacturer's sales agent and tool user. Yokohama City, Kanagawa Prefecture, and Japan External Trade Organization (JETRO) collaborated to provide information on the investment environment and the contents of support. Source: shutterstock_684671680 (Nikkan Kogyo Shimbun, 20.02.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Digitalisation in Japan -Quo Vadis

Siemens' Japanese subsidiary partnering with Omron in IoT Siemens Japan is expanding its collaboration in IoT applications. It has recently partnered with OMRON, a competitor in control equipment. The two companies plan to integrate the management of several plants into a new joint service, starting in 2021. The collaboration aims to enhance the software that can be used on Siemens' MindSphere proprietary IoT platform, building a pillar of revenue from hardware sales. MindSphere is a system that collects and analyses hard operational data, mainly from industrial machinery, on the cloud. It enables clients to detect defects in production equipment and predict failures. It was rolled out in the Japanese market in 2018. It is a subscription model where users pay for software usage. Initially, MindSphere required Siemens’ own operating software, but now MindSphere can be used by clients with software developed by external developers and partners. There are already dozens of partners, mainly IT (information technology) companies such as International Information Service (ISID).

The new partner Omron currently operates a service called "i-BELT," which analyzes factory operation data collected from its own control devices and switches to improve production. This service is to be made available on Siemens MindSphere. The advantage for Omron is in being able to reach a bigger customer base through MindSphere. It is unusual for MindSphere to offer software from competitors in the fields of control equipment and machine tools. The two companies are promoting joint developing of services. From 2021 OMRON's Kusatsu Plant (Shiga Prefecture) will offer full-scale validation services integrating analysis and data management gathered from production facilities at several sites. Previously, Omron's i-Belt was only able to analyze operational data within a single factory. Using MindSphere to connect to the cloud, it is possible to collate production data collected by i-Belt from multiple factories, to draft a cross-sectional improvement plan and speedily implement it.

Siemens business focus in Japan had been on hardware and machinery sales, such as power generators, but in recent years it has turned its attention to providing comprehensive support for manufacturing industry through MindSphere. The company plans to double the number of domestic MindsSphere users to 200 companies by 2020. (The Nikkei Shimbun, 21.01.2020)

Yokogawa Electric's latest plant information management system strengthens OPC UA Corporation has released the latest version of its Exaquantum plant information management system. The new release strengthens operability with OPC UA, a standard protocol for industrial data exchange, improving effectiveness in working with business systems and data analysis tools. Closer operability with "OPC UA” also makes it possible to collect data from sensors, complex systems, and business software safely. The new release also increases 16-fold the volume of data that can be retrieved at one time, making it easier to analyze data using Microsoft's Excel spreadsheet software. Source: shutterstock_rendered (Nikkan Kogyo Shimbu, 14.01.2020)

Tsubakimoto Chain is considering OPC UA as communication standard Tsubakimoto Chain Co. will add new functions to its IoT factory monitoring software MitaMon, making it possible to connect with various manufacturers’ programmable logic controllers (PLCs) to provide detailed monitoring of production facilities and power usage throughout an entire factory site. Making full use of its featured compatibility with all operating software (OS). MitaMon greatly strengthens the company’s position in operational monitoring solutions.

At present, the monitoring volume is limited by the stacked signal mechanism that converts the data. If a direct connection to a PLC is used, the PLC can read the data directly and can also see the information from the devices controlled by the PLC in greater detail. Compatibility with major communication standards such as Modbus is planned in 2020, and interoperability with OPC UA, which allows devices of different manufacturers to connect to higher-level systems, will be considered.

Tsubakimoto Chain mainly focuses on automotive and industrial chains, but entered the factory management soft-ware business in 1996 with its "Nintaro 32" and has maintained a high market share in the industry. (Nikkan Kogyo Shimbun, 27.02.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Industry Scenario

Automobile Industry

Toyota gets serious about flying cars: 43 billion yen invested in US venture Toyota Motor Corporation announced on January 16 that it will invest $394 million (approximately 43 billion yen) in a US venture to develop airframes for a "flying car." Toyota will provide know-how such as production technology and e-mobility, and will cooperate in the fuselage development and volume production. Flying cars are attracting attention as a way of reducing urban congestion and providing transportation services in depopulated areas. Toyota intends to aim for the skies where high growth is expected.

Toyota’s investment partner, California-based Joby Aviation, aims to mass produce an electric vertical take-off and landing (eVTOL) aircraft. Toyota is involved in technical development of design, materials and electrification, and provides know-how from the Toyota Production System (TPS), bringing both high safety and low cost. After the investment, Toyota's Vice President Shigeki Tomoyama will be appointed to Joby’s’ board. As well as not needing a runway for take off and landing, eVTOL aircraft provide superior noise suppression and environmental performance. They are expected to be in demand for short-distance business and urban travel. Details of the fuselage and its production plan will be determined after the investment is concluded.

“Air transportation has been a long-term goal for Toyota, and while we continue our work in the automobile business, this agreement sets our sights to the sky," commented Toyota Motor Corporation President and CEO Akio Toyoda. Major aircraft manufacturers Boeing and Airbus have also begun developing ‘flying car’ type aircraft, and competi-tion in next-generation transportation is intensifying. (The Nikkei Shimbun, 17.01.2020)

Japanese car sales hold steady in China, up 2.7% on the year Although the new coronavirus has had a huge impact on Sales in 2019 Carmaker business in China and has added to the business in China (Units) slowdown, sales of Japanese cars in 2019 were strong. Toyota 1,620,700 Total sales of Japanese car manufacturers in 2019 were Nissan 1,546,891 approximately 4.56 million units, up 2.7% from the previous year. In the same year, China's real growth rate fell to a 1,554,433 low of 6.1% for the first time in 29 years, and new car sales 227,750 in the Chinese market overall fell 8.2% year-on-year to Mitsubishi 142,309 25.76 million units, falling for the second consecutive year. 25,204 Seen against this background, Japanese companies have performed well with the launch of new models. Source: Nikkan Kogyo Shimbun

Four of Japan’s six automakers recorded year-on-year sales increases in China in 2019: Toyota, Honda, Mitsubishi and Subaru. Toyota's new Corolla / Levin and RAV4, and Honda's Civic and Accord models, posted new record highs.

US-China trade friction is depressing China’s market for new cars. Since subsidies were reduced in the NEV (New Ener-gy Vehicle) sector which includes electric vehicles (EV) sales are lower than the previous year for the first time. Con-sumer attitudes are shifting, and Japanese industry leaders believe their sales are benefiting from the Source: istock / 475057077_njpPhoto realisation that Japanese cars offer good quality and fuel economy.

China's real growth rate is likely to remain stagnant at around 6% in 2020, and the new car market is likely to lack strength. The China Association expects a 2% decrease in 2020. Honda expects to sell more than in 2019, but this does not change the view that the market will be difficult. (Nikkan Kogyo Shimbun, 20.01.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Honda to end passenger car production in the Philippines in late March Honda Motor Co., Ltd. announced on February 22 that it will end passenger car production in the Philippines in late March. As part of an efficient production system that is being promoted worldwide, after local production is completed, supply will be provided from neighboring countries such as Thailand. The main production models are "CITY" and "BR-V". With an annual production capacity of 30,000 units, smaller than factories in other countries, production in 2019 was only about 7,000 units. (The Nikkei Shimbun, 22.02.2020)

Toyota and Toyota Industries to jointly develop HV batteries Toyota and Toyota Industries announced on February 20 that they will jointly develop a new vehicle- mounted battery for hybrid vehicles (HV). Toyota has expertise in battery technologies for HVs, and Toyota Industries is skilled in fork-lifts. Toyota is expanding its battery procurement network as demand for electric vehicles increases in response to stronger environmental regulations. The two companies will develop a new compact battery which will be mounted on Toyota's HV. It has higher output and longer life than conventional lithium-ion batteries. It will be produced at a new building constructed next to Toyota Industries' Kyowa Plant (Obu City, Aichi Prefecture) and the Higashiura Plant (Higashiura Town, Aichi Prefecture). The investment amount and production scale are to be determined.

Toyota plans to increase sales of EVs and HVs to 5.5 million units by 2025, which will be 2.8 times the 2019 level. Toyota is partnering with to establish Prime Planet Energy & Solutions, supplying automotive batteries for HVs and EVs. Its subsidiary, Prime Earth EV Energy (PEVE) will also build a new plant. In June 2019, Toyota entered into partnerships with China's Ningde Era New Energy Technology (CATL) and BYD (BYD) to procure batteries for EVs. (The Nikkei Shimbun, 20.02.2020)

OPEL returns to Japan Opel, a middle-market car maker now part of the French group PSA, announced its return to Japan in the latter half of 2021 after an absence of 15 years. It will focus on small cars such as its mainstay “Corsa” as strategic vehicles in ur-ban transport to expand its sales network. Opel’s return to Japan follows on from PSA’s interest in expanding sales of small cars, and Opel is also considering entering the Chinese market.

Initially Opel will reenter the market with 3 models in the latter half of 2021: the Grand Land X, a multi- purpose sports car (SUV); the Combo Life, a small van; and the Corsa. It will monitor the sales situation as it determines whether to add to the lineup. Opel will initially establish sales outlets in major cities such as , Yokohama, Nagoya, and , and gradually expand its area reach. Explaining the reasons behind the decision at a press conference in Tokyo on February 18, Opel CEO Michel Lohscheller emphasised the importance and potential of Japan, the world’s third largest market. He also said that the company is watching the Chinese market closely for the right time to enter.

Opel sold about 38,000 units in Japan at its peak in 1996, but withdrew from the Japanese market in 2006 due to a deepening management crisis at its then new parent company GM. The current parent company PSA has three brands in Japan: Peugeot, Citroen and DS. Its small cars with an emphasis on design appeal mainly to consumers in their 30s and 40s, and the company’s sales increased by 15% in 2019 to 15,600 units. It will now look at developing demand with Opel’s Corsa among its strategic vehicles. (The Nikkei Shimbun, 18.02.2020)

Source: shutterstock_1107176363 VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Electronics

Home electrical appliance up 2.7% in domestic shipments in 2019 Japan Electrical Manufacturers' Association (JEMA) announced on January 27 that domestic shipments of home electric appliances in 2019 were 2.7 trillion yen, up 2.7% from the previous year. This is the highest level in 23 years since 1996. Despite the unseasonable weather in July and a reactionary fall following the consumption tax hike, large home appliances such as room air conditioners, electric refrigerators and electric washing machines performed well.

Domestic shipments in 2019 have been positive for four consecutive years, the highest shipment since 1997. Due to last-minute demand before the consumption tax hike, shipments in September rose 20.2% year-on-year to 238.5 billion yen, a record for the month of September. Room air conditioners are performing well as in the previous year. In 2019, shipments rose 1.7% to 9.81 million units. Although the weather fell in July 2019 due to unseasonable weather, the heat wave after the rainy season and the last-minute demand before the consumption tax hike led to the highest shipment volume since 1972 when data can be confirmed.

The market was driven by large home appliances such as electric refrigerators and electric washing machines. The number of electric washing machines increased by 4.5% and the number of electric refrigerators increased by 0.5% compared to the previous year. Large washing machines and refrigerators that allow bulk washing and bulk buying continue to be popular.

Domestic shipments in December 2019 were 219.7 billion yen, a year-on-year decrease of 6.7%, for the third consecutive month. The reactionary fall in the consumption tax hike has had an effect. However, compared to the previous 2014 consumption tax hike, there is a strong view that the rush and recoil have slowed. (The Nikkei Shimbun, 27.01.2020)

Of the eight major electric companies, five had operating profit declines in the April- December 2019 period China, a huge market, is hampering the performance of electronics giants. In the April to December 2019 consolidated financial results of eight major electric companies, five companies saw operating profit decline. The automobile and smartphone markets have fallen due to the slowdown in China's economy triggered by the US-China trade friction, and related manufacturing equipment, electronic devices and materials have been sluggish. Electric companies have hardly factored the impact of the spread of COVID-19 into their full-year earnings forecasts, and are facing further downside risks.

Sales Results Sales Forcast (Apr.-Dec.2019) (Mar.2020)

Change rate Change rate Billion Yen Billion Yen (YoY) (YoY) 6,344.1 -6.5% 8,700.0 -8.2% 6,511.0 -0.4% 8,500.0 -1.9% Panasonic 5,755.6 -5.4% 7,700.0 -3.8% 3,250.1 -0.4% 4,500.0 -0.4% 2,752.0 -2.1% 3,850.0 -2.6% 2,458.5 -7.1% 3,430.0 -7.1% NEC 2,175.6 6.9% 2,950.0 1.3% Sharp 1,755.5 -0.9% 2,450.0 2.1% Souce: Nikkan Kogyo Shimbun

In Toshiba's consolidated financial results for the period from April to December 2019, operating profit jumped 7.6 times year-on-year to 62.5 billion yen. The main factors for the increase in profit were the effects of structural reforms in the semiconductor and power system businesses, which were 35.6 billion yen, procurement reform of 18.9 billion yen, and reduction of fixed costs of 13.8 billion yen. However, in the individual business environment, the sluggish Chinese market has been prolonged, and the printing business of semiconductors and Toshiba Tec is currently struggling. The full-year outlook is to reverse the risk buffer (risk reserve) that was initially set up and absorb the downside of each business.

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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At Hitachi, a listed subsidiary of Hitachi Construction Machinery dropped sales in China and India, and Hitachi Metals also saw weak sales of materials for automobiles, semiconductors and factory automation. Panasonic and Mitsubishi Electric did not perform well in automotive-related manufacturing facilities and in-vehicle components.

On the other hand, Fujitsu and NEC, which rely heavily on the domestic market, saw operating profit increase. Profitability was boosted by IT services and PC sales, supported by the relatively solid domestic economy.

Companies have not yet determined the impact of the spread of the new type of pneumonia in China. Prolonged damage to the Chinese economy and supply chain due to the spread of infection will inevitably affect consolidated business results for the fiscal year ending March 2009. (Nikkan Kogyo Shimbun, 17.02.2020)

Sales of semiconductor devices made in Japan down 8.1% in FY2019 Semiconductor Equipment Association of Japan (SEAJ) announced on January 9 that the sales value of Japanese-made semiconductor manufacturing equipment in FY2019 will decrease by 8.1% from the previous fiscal year to 2.5658 trillion yen. The drop in memory investment for data centers has an impact.

On the other hand, we revised it up slightly from the previous forecast in July 2019. Investment for the next-generation communication standard "5G" is expected to start sooner than expected, and investment in semiconductors for computation and contract manufacturing of semiconductors is said to Source: shutterstock_1107176363 be strong.

In addition, the company announced the sales forecast for 2020-2021. The recovery in investment in memory is expected to increase by 8% in FY2020 to 2,231.1 billion yen, and to increase by 12% to 2.4988 trillion yen in FY2021. (The Nikkei Shimbun, 09.01.2020)

Cyberattack on Mitsubishi Electric: Chinese connection suspected in leak of defence information Mitsubishi Electric reported on January 20 that confidential personal and business information may have been leaked to external parties in the massive cyberattack on the company. It appears that information on projects in defence, electric power, railways and other infrastructure, as well as details of customer product orders and related information, research data and board meetings, were included in the documents leaked.

The company reported that at least several dozen PCs and servers in Japan and overseas have been found compromised. The volume of unauthorised access was approximately 200 megabytes, mainly in documents. Documents relating to government agencies such as the Ministry of Defense, the Nuclear Regulatory Commission, and the Agency for Natural Resources and Energy, together with assorted information on domestic and overseas companies in electric power and telecommunications, railway companies, and automakers, were subject to unauthorised access. The company noticed the unauthorised access on June 28, 2019, when it detected suspicious file activity on a server in Japan. Since similar files were found in China and several other locations, the company considered the possibility that it was under a massive cyberattack, and limited external access of the target devices. As an internal investigation was under way, the company did not make a public announcement. (The Nikkei Shimbun, 20.01.2020)

Horiba, German subsidiary to triple production of fuel cell test equipment by 2023 Horiba plans to triple the production capacity of its German subsidiary Horiba FuelCon by 2023. The Barleben-based company produces testing apparatus for fuel cell and lithium ion batteries. The company will invest approximately ¥ 3.5 billion and establish a new plant with a total floor area of approximately 10,000 square meters near the subsidiary's main plant. With the growing worldwide trend towards e-mobility, demand for fuel cell vehicles (FCVs) and electric vehicles (EVs) is expected to grow, and the investment will strengthen the company’s ability to supply.

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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HORIBA’s five-year plan aims for sales of 300 billion yen by Fiscal 2023 (compared with 210.5 billion yen in the fiscal year ending December 2018). Its e-vehicle development business has a sales target of 10 billion yen, of which about half is to be generated by its German subsidiary. The FCV, which runs on electricity generated by the chemical reaction of hydrogen and oxygen, is considered the "ultimate eco- car,” and governments in China, Europe and Japan are en-couraging its development. Demand for fuel cell testing equipment in particular is growing.

Construction of the new plant started in February, and completion is expected in November 2021. The site area is 29,000 square meters. The five-story building has a total floor area of about 10,000 square meters, about six times the size of the main factory. The plant’s customers are automakers and parts manufacturers from around the world, and each test device is a customised product, built to order. When it becomes operational in 2023, the new plant will add 150 jobs, bringing the labour force to 250. Horiba Fuelcon was acquired in autumn 2018. Its sales are growing as it makes use of Horiba group sales channels, and its customers accelerate the development of next-generation vehicles. Horiba has a vast test course. Horiba is also investing vigorously in its UK subsidiary, where it is involved in cyber security for autonomous driving, and in assisting customers in developing cars. The company has expanded from its core business activity of exhaust monitoring devic-es to the entire field of automobile development. (Nikkan Koygo Shimbun 21.02.2020)

Toshiba doubles production capacity of semiconductor substrates for power control Toshiba Corporation announced on January 27 that it will establish a new production base for silicon nitride substrates, a component for modules that control electric power in motors. The company plans to invest more than 10 billion yen by 2022. This will more than double the production capacity of its current existing plant located at its headquarters in Yokohama. The investment is in response to growing demand for power semiconductors due to electrically powered cars and factory automation.

Toshiba Materials, a Toshiba subsidiary, will establish a new production facility in the Oita branch of its affiliated company, Japan Semiconductor (Iwate Prefecture). It is due to become operational in July 2021, with an initial production capacity of 40,000 square meters per year, to be scaled up to the next level by Fiscal 2022. Combined with the expansion of the current headquarters facility at Yokohama, the company’s capacity will be double its current level by FY 2023. Silicon nitride substrates have advantages in thermal conductivity and vibration resistance. There is growing demand for heat dissipation and insulation parts in power modules that are indispensable for controlling motors used in electric vehicles and robots for smart factories. (The Nikkei Shimbun, 27.01.2020)

Hamamatsu Photonics to invest 60 billion yen in 3 years in production of high- performance sensors Hamamatsu Photonics K.K. will invest a total of 60 billion yen in capital equipment over the three years to September 2022, a 30% increase over the previous three years. It will add to its production facilities in preparation for the growth of optical components such as high-performance sensors, where demand is expected to grow due to the spread of autonomous driving and drones. Although the outlook for the global economy is uncertain, the company is building a foundation for long-term growth.

Its capital investment over the next three years continues the high trend of 24.6 billion yen to September 2020 and 22.6 billion yen to September 2021. Work is already in progress on a new building at the Toyooka plant for research and development of electron tubes, and a new building for the production of optical semiconductors — which are light-receiving and light-emitting devices — at the Shinkai Plant. The company also intends to allocate expenses in FY2021 and FY 2022 for the construction of two additional buildings in Japan.

Company president Akira Hiruma said he is targeting investment in a high-performance sensor called "LiDAR (rider)". The sensor, which reflects laser light to accurately measure the distance to the target, is expected to be used for auto-matic driving. In addition, he sees "extended applications for drones and robots.”

The company is also considering investing in parts for automotive technologies such as ‘micro focus X- rays, which are used in inspecting lithium-ion batteries for electric vehicles, and “stealth dicing”, which uses laser light to separate semi-conductor wafers. (The Nikkei Shimbun, 20.01.2020)

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Nitto Kogyo: 20 billion yen in new Tochigi plant; expansion of 5G production Nitto Kogyo Corporation, a large-scale manufacturer of electronic switching equipment, announced on February 25 that it will invest 20 billion yen in a new plant to be built in Seto City, Aichi Prefecture. The plant will have a total floor area of 36,000 square meters, and will produce major parts and components for switchboards and breakers. It acquired the land from Seto City on February 27, and production is scheduled to begin in April 2024.

On the same day, the company announced that it would expand its factory in Nogi-cho, Tochigi Prefecture. It will purchase land and buildings adjacent to its existing factory (78,000 square meters) Source: shutterstock_1040657377 from Kurita Kogyo for 1.3 billion yen in March. The site produces storage cabinets for server units. The capacity of the existing factory was approaching its limits. The company judges that demand for storage cabinets will grow with the shift to 5G - and beyond that to 6G communication standards. (The Nikkei Shimbun, 25.02.2020)

Aiming at 5G, Noritake increases electronics materials Noritake Co., Ltd. is to increase its production of electronic pastes and other materials used in electronic components. It will establish a new production line at its Matsusaka Factory (Matsusaka City, Mie Prefecture), and build a new factory in the same city. Including its investment in China and elsewhere, the company will have invested more than 20 billion yen by the fiscal year ending March 2022, a 50% increase over the past three years. The company has set a course of vigorous investment aimed at capturing the increased demand from 5G communications and EVs.

The Matsusaka Plant will produce two new products: electronic paste, a component in communications equipment, and ceramic core, which is used in manufacturing jet engines. Work on preparing the lines started in December 2019, and by this autumn Noritake expects to have increased company-wide production capacity of both products by 1.5 times. In addition, the company is moving ahead with plans for its new factory in Matsusaka City, which will produce electronic paste and ceramic powder, which is also a material for electronic components.

As 5G progresses, Noritake expects increased demand for its materials in Multi-Layer Ceramic Capacitors, which are installed in mobile phone base-stations and mounted on devices. Noritake aims to supply materials to the telecommu-nications equipment manufacturers for their MLCCs, which are purchased by the phone companies.

Currently, materials for electronic components are mainly produced at the Miyoshi sales branch (Aichi Prefecture). With the increasing demand for EVs, interest in electronic paste and ceramic powder for MLCCs has also grown. Some lines at the plant have been continuously running at full capacity, and expansion is now necessary to keep up with demand. (The Nikkei Shimbun, 29.01.2020)

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Chemicals & Pharmaceuticals

Ethylene production in 2019 will increase for the first time in two years By January 23, the Japan Petrochemical Industry Association (JCIA) and the Vinyl Environmental Council (VEC) have compiled production and shipping statistics (quantity basis) for five general- purpose resins in December 2019. Ethylene, the basic raw material for chemicals, increased for the first time in two years from the previous year in total production from January to December 2019. This was mainly due to the fact that only three plants underwent regular repairs, four fewer than in the previous year. Ethylene's production capacity utilization in December 2019 was 95.4%. It exceeded the standard of high utilization of 90% for 73 consecutive months. Ethylene production from January to December 2019 was about 6.42 Source: shutterstock_110393483 million tonnes, 4.2% higher than the previous year.

In 2020, there will be six plants scheduled for regular maintenance, so if the occupancy rate is around 95%, the same as in 2019, the production volume is expected to be 6.1 million tons. Production volume (based on quantity) of five general-purpose resins in December 2019 was higher than the same month last year for three resins, high-density polyethylene, polystyrene, and PVC resin. However, due to the global economic slowdown, domestic shipments decreased for the four resins other than low-density polyethylene compared to the same month of the previous year, and inventories increased for non-PVC resins. (The Nikkei Shimbun, 23.01.2020)

January Ethylene production decreased by 10.6%. The Japan Petrochemical Industry Association (JCIA) announced on February 20 that January production of ethylene, the basic raw material for chemical products, fell 10.6% year-on-year to 518,700 tons. In January, an ethylene plant at Mizushima Complex (Okayama Prefecture), jointly operated by Mitsubishi Chemical and , was shut down for two weeks due to equipment trouble. Ethylene production capacity utilization in January was 91.1%. That is below the 95% benchmark for practical full operation for the first time in three months.

The production volume (based on quantity) of the five main resins compiled by the Petrochemicals Association and the PVC Industry and Environment Association was lower than the same month last year for all resins, mainly due to the low availability of ethylene plants. In domestic shipments, only low- density polyethylene (PE), which increased shipments in the film field, posted a year-on-year increase.

Exports increased sharply for high-density PE and polypropylene (PP) in reaction to lower levels in the previous year. The stock level is high for low density PE, high density PE, PP and polystyrene. (The Nikkei Shimbun, 20.02.2020)

Mitsubishi Chemical acquires German carbon fibre composites company Mitsubishi Chemical Corporation announced on January 21 that it will acquire the carbon fibre composite material manufacturer c-m-p (Heinsberg, Germany). The purchase price is expected to be around 4 billion yen. The acquired company, c-m-p, produces an intermediate material called "prepreg" in which resin is contained in a sheet of carbon fibre. The acquisi-tion gives Mitsubishi Chemicals a secure prepreg production base in Europe in addition to Japan and the United States, and strengthens its sales to local automobile and aircraft manufacturers.

The acquisition was completed in February through a European group company. c-m-p has its headquarters and facto-ry near Dusseldorf. Its annual sales are 13.3 million euros. In addition to automotive suspension parts, the company sells prepregs for interior materials used by aircraft builder Airbus.

As well as prepregs, Mitsubishi Chemicals also plans to operate a new carbon fibre composite plant which mixes short carbon fibre and resin. The plant, in Italy, is expected to become operational in September. Advanced materials are a pre-requisite in the development of cars and other manufactured products in Europe; and Mitsubishi Chemicals in-tends to strengthen its position in carbon fibre-related products and enhance its product line-up through acquisition and setting up new production bases. (The Nikkei Shimbun, 21.01.2020)

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Astellas to add new facility in Toyama for immunosuppressants; operation planned for FY2024. Astellas will build a new production facility for its immunosuppressant drug “Prograf” at its manufacturing base in Toyama Technical Center (Toyama City). The company aims to build a stable supply as Prograf continues to sell steadily. The total construction cost is 10 billion yen. The facility is expected to be operational in early 2024. It will have three floors above ground, a total floor area of about 7220 square meters. Construction will begin in April and completion is expected in August 2021. The facility will be named "3rd Fermentation Building”.

“Prograf” is a blockbuster immunosuppressant drug developed by Astellas. It is used to control rejection after organ transplantation. Even though generics are available, “Prograf” has maintained strong sales mainly in Japan and Europe, achieving 195.7 billion yen in FY2018.

Toyama Technical Center is operated by Tech, a production subsidiary of Astellas Pharma Inc. (Chuo-ku, Tokyo). The Center already produces the pharmaceutical ingredients for “Prograf”, and will restructure its production system to ensure a stable supply. The Center will process the ingredients and ship the drug worldwide.

The center is one of Astellas' production bases in Japan. The company is continuing its capital investment. It completed a bio API manufacturing Source: shutterstock_450321097 facility in December 2019, and full-scale production of antibodies will begin around spring. (Nikkan Kogyo Shimbun, 20.01.2020)

Denka to produce norovirus vaccine; acquires land acquisition in Halle, Germany Denka Corporation has decided to acquire land in Halle, Germany for production of the norovirus vaccine. The company intends to build a pilot factory on the site. The pilot will use protein from the tobacco plant to produce antibodies for the vaccine. Currently, there is no cure for norovirus infection, and treatment is limited to relief of symptoms such as rehydration. The facility is also expected to develop technology for drug discovery.

Denka made the German company Icon Genetics a full subsidiary in 2015. Icon has expertise in plant genetics, ena-bling it to produce high-molecular-weight proteins such as antibodies and antigens at low cost and in a short time. It is using this technology to develop a norovirus vaccine using virus-like hollow particles (VLP) as an antigen. Anticipating the spread of norovirus, in 2018 Denka signed a license agreement with Kazuhiko Katayama, a professor at Kitasato University, to develop a vaccine from VLP mixture.

Denka’s subsidiary Denka Seiken is one of the major manufacturers of influenza vaccines and a supplier of antigen detection kits. Denka has positioned its healthcare business as a growth area in its five-year plan to 2022. Among its new business areas, the company is working on cancer genetic testing information services, for which it aims to apply for approval in June following Chugai and Sysmex. It also plans to file an early regulatory application for a herpesvirus-based brain tumor virus preparation, "G47Δ," using virus culture and purification techniques in cooperation with . In addition, Denka plans to commercialize a sepsis panel test reagent in FY2021 by using the simultaneous multi-item measurement technology of Plex Bio of Taiwan, with which Denka has a capital and business alliance. (Nikkan Kogyo Shimbun, 24.01.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Steel

Japan's crude steel production, lowest level in 10 years Japan's Crude Steel Production in 2019, announced by The Japan Iron and Steel Federation on January 23, fell 4.8% to 9.28 million tons. It has decreased for the fifth consecutive year and has dropped below 100 million tons for the first time in 10 years. The slowdown in the global economy due to prolonged US-China trade friction has reduced exports to the manufacturing industry, and domestic demand has been sluggish. Production troubles and natural disasters also overlapped. Steel companies are rushing to cut production and rationalize production facilities while demand is not expected to recover, and it is possible that less than 100 million tons of production will become normal. Source: shutterstock_136149383

There were two factors that caused production to slow in 2019. The first is the global slowdown caused by the U.S.-China trade fliction. Exports to manufacturing industries, such as the automotive and industrial machinery markets in Asia, where major Japanese steel giants are the mainstay, fell. On the other hand, domestic demand, mainly for building materials, is expected to have reached the end of large projects for the Tokyo Olympics.The sluggish economy continued due to a decrease in the number of housing starts and delays in construction due to labor shortages. The second is disasters such as large typhoons and production troubles at each company. JFE Steel's blast furnace production troubles since 2018 have led to a prolonged cut in production. In September 2019, Typhoon No.15 damaged the Kimitsu Works of (Chiba Prefecture), resulting in prolonged suspension of production. Crude steel production has been negative for the sixth consecutive month until December.

In 2020, there is no prospect of a recovery in manufacturing such as automobiles and machinery, mainly in China and Southeast Asia. Domestic demand is also expected to stagnate during construction of the Tokyo Olympics. Domestic steel consumption in 2020 could be less than 60 million tonnes. (23.01.2020, The Nikkei Shimbun)

1.3% increase in domestic crude steel production in January The Japan Iron and Steel Federation announced on February 21 that domestic crude steel production in January was 8,244,000 tons, up 1.3% from a year earlier. The year-on-year result was higher than the previous year's results for the first time in seven months, due to a reactionary low in the same month last year due to a production trouble at a major blast furnace. However, the effects of the COVID19 may become apparent in the future.

Looking at the production volume by furnace type, the amount of converter steel produced in blast furnaces increased by 5.6% year-on-year to 6,473,000 tons for the first time in six months. In January 2019, the production volume decreased due to a blast furnace trouble at JFE Steel, and the increase due to the reaction is expected to be large. Electric arc furnace steel, which is made from scrap, fell by 12% to 1.771,000 tons for 11 consecutive months.

At present, exports continue to decline for mainstay exports, and demand is declining both in Japan and overseas. Among major blast furnace maker, Nippon Steel has decided to rationalize such measures as closing steelworks and suspending blast furnaces. JFE Steel has also decided to suspend some lines at East Japan Works. In 2019, orders for ordinary steel products fell 4.7% from the previous year to 6.91 million tons, the lowest level in 10 years since 2009. (Nikkan Kogyo Shimbun, 21.02.2020)

Brass products production down 8.1% in 2019, Low level for the first time in 10 years The Japan Copper and Brass Association (JCBA) announced on January 28 that copper production in 2019 was 573,005 tons, down 8.1% from the previous year. This was the lowest level in 10 years since 654,357 tons in 2009 due to the slump in the manufacturing industry due to the slowdown in the global economy.

By major product, copper strips used in automotive terminals and connectors decreased by 7.1% year- on-year to 250,776 tons. Sales were sluggish by overseas automakers, especially in China, and this was the first negative in four years. Brass strips with overlapping uses decreased by 9.8% to 97,608 tons. Brass rods used for faucet fittings decreased 6.9% to 175,391 tons. (The Nikkei Shimbun, 28.01.2020)

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Other materials (textil, film, paper, materials for batteries etc.)

Toray Supports 100% Plant-Derived Synthetic Fiber Essential Consumption Toray will mass-produce 100% vegetable-derived products in the first half of the 2020s, the world's first polyester fiber used widely in clothing and other clothing. Switching from petroleum feedstocks leads to decarbonization. As "ethical consumption" for environmentally friendly products and services is expanding, the demand for new materials from apparel manufacturers is expected to increase. Environmental technology further influences corporate growth.

Toray succeeded in trial production of polyester fiber derived from whole plants. Joint development with Vilent (Wisconsin), a U.S. start-up company for biofuels. Source: iStock-948568518_WangAnQi Applications such as sportswear, women's clothing, and automobile interior materials are expected.

Typical polyester fibers are made from terephthalic acid and ethylene glycol, with a 7:3 ratio. Both feedstocks were previously made from petroleum. A stream has emerged that makes it plant-derived. Sugar cane has already been used for ethylene glycol. India's India Glycols and other major textile companies, such as Toray and Taiwan's Far Eastern New Century, sell some plant-derived textiles.

The other terephthalic acid was produced in large quantities, but the use of plants has not progressed. This time, this paper utilizes the technology of the bilient with the application know-how of the plant. You may use a part of sugar cane or corn that doesn't turn around for cooking.

The durability and ease of processing are said to be comparable to those of petroleum products. The initial price is higher than the price of fiber made from petroleum alone, but both companies intend to reduce costs by developing mass production technologies. Toray considers consumer and retail changes as a business opportunity. The company plans to supply four times more environmentally friendly products than in FY2013, compared with FY2030, by introducing fibers made entirely of vegetables.

Other major domestic companies also expect polyester fibers made from plants. In 2019, developed the first "Ecole Club Bio" using some plant-derived raw materials. 's sales of Sorotex, which uses a quarter of plant-based raw materials, are favorable. Sales have grown at a rate of two to three percent every year since 2015. Sales in fiscal 2019 are expected to rise 25% year-on-year to approximately 10.0 billion Yen. (The Nikikei Shimbun, 21.02.2020)

Teijin to establish a research subsidiary for automobile composites in Germany On January 28, Teijin announced that it would establish a R&D subsidiary for composite materials for automotive parts in Germany in February. In response to the need to reduce the weight of automotive parts, we will establish a system that enables us to consistently develop and evaluate exterior parts made of fiberglass resins (GFRP) and other composites. Teijin is expanding its production base for composite materials in Europe through mergers and acquisitions, and will increase its ability to offer proposals to automobile manufacturers.

The new company, Teisin Automotive Centre Europe (TACE), is established on the premises of a local subsidiary in Western Germany, Vippertal. The amount of investment is not publicly announced, and the number of employees is about 10. Introduction of durability test equipment to design and evaluate composite materials for automobiles.

Teijin acquired Continental Structural Plastics (CSP) in 2017, a manufacturer of plastic parts for automobiles whose production bases are located in Europe, and Bennett Automotive, a Czech auto parts processing company, in 2019. The company is strengthening its overseas expansion of composite materials for automobiles. (The Nikkei Shimbun, 28.01.2020)

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Kuraray ¥5.0 billion for detergent packaging at a new film plant in Europe On February 13, announced that it would invest 5 billion yen in Poland and construct a new factory for packaging film. Demand for individual packaging of detergents and pharmaceuticals is growing, and the company aims to start operations in 2022. The production base for this film will be increased from the United States and the United Kingdom to three countries to increase its supply capacity. Starting production in Poland is a product called water-soluble poval film. Kuraray will establish a new plant in southwestern Poland through a wholly owned manufacturing and sales subsidiary in the United States. The company says its production capacity is unpublished.

Kuraray produces povar, a film raw material, at four bases in Japan, the U.S., Germany, and Singapore. In Poland, raw materials are imported and processed into films. The company's plant in the U.K. mainly handles dishwasher detergents, while Poland is mainly a production base for laundry detergents. (the Nikkei Shimbun, 13.02.2020)

Domestic demand for paper and paperboard decreased by 1.7% in 2020 Domestic demand for paper and paperboard in 2020, summarized by the Nippon Paper Association, is expected to decline 1.7% year on year to 24,942,000 tons. Ten consecutive years are less than the previous year. It was considered to decrease to 8% of the previous peak of 00 years. The use of printing and information papers and newsprint decreases with the progress of digitalization. Corrugated cardboard is slowing as simple packaging for mail-order sales and home delivery is progressing.

Paper and other paper are expected to drop 3.2% to 13,134,000 tons. Printing and information papers decrease 3.8% due to a decrease in the number of catalogs and flyers. Sanitary paper such as toilet paper is projected to rise 0.8% year on year to 2,033,000 tons. Demand for towel paper is expected to increase due to the inbound effect of the Tokyo Olympics and heightened hygiene awareness.

Paperboard is expected to increase only slightly by 0.1% to 11.87 million tons. While solid demand is expected for processed foods and vegetables, the company expects smaller and lighter packaging for mail-order sales and home delivery. (The Nikkei Shimbun, 21.01.2020)

Idemitsu started operation with new production facilities for storage battery materials in 2021. On February 18, Idemitsu Kosan announced that it would install a solid electrolyte production facility as a battery material at its Chiba Plant (Ichihara City, Chiba Prefecture). Demand for electric vehicles (EVs) is expected to grow as a material that is expected to be useful for improving the performance of batteries and miniaturizing them. In 2021, the plant was put into operation, and sample shipments to battery manufacturers began. This will lead to the construction of a full-scale mass production system.

Capital expenditures and production capacity are not disclosed. Solid electrolytes for lithium-ion batteries are produced. Since conventional electrolytes are liquid, there are problems such as ignition risk due to liquid leakage. Idemitsu will examine the cost of commercial production over several years after the production facility has been put into operation.

In December 2019, Metals announced that it would install production facilities at its R&D Center in Kamio City, Saitama Prefecture. Competition for development is intensifying. (The Nikkei Shimbun, 18.02.2020) Source: shutterstock_739515940

SANYO Chemical plant in Fukui next spring for mass production of all resin batteries SANYO Chemical Co., Ltd. will start mass production of next-generation lithium ion batteries "all-resin batteries" in spring 2021. A new factory will be constructed in Fukui Prefecture by investing 15.0 billion yen to mass-produce all resin batteries that are less likely to ignite and lower production costs than lithium ion batteries for the first time in the world. Develop demand for storage batteries for emergency power sources.

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In 2019, APB Corporation will construct a plant to start up development of battery technology, which became a subsidiary. The plant has acquired a factory building with a site of approximately 30,000 square meters in Fukui Prefecture, and will start operation in spring 2021 after preparing production facilities. The company plans to secure a production capacity of 1 gigawatt-hour (1 billion gigawatt- hours) batteries in 2025. The equivalent of 25,000 electric vehicles (EVs) is equivalent to an annual storage battery.

APB will raise approximately ¥9.0 billion through a third-party capital increase in February in order to secure funds for the construction of the plant. Six major domestic energy companies, including JFE Chemical Corp., and major chemical companies, are expected to accept the capital increase. Sanyo Chemical's stake is expected to fall below the majority of its current 66%. APB was launched in 2018 by Professor Hideaki Horie of Keio University, who was involved in the development of EV leafs in Nissan Motor. In 2019, SANYO Chemical, which is a superabsorbent resin (SAP) for paper diapers and has the strength in processing technology, became a subsidiary.

All-resin batteries are next-generation lithium-ion batteries in which parts such as electrodes are replaced with resin instead of metal. Highly safe, such as not igniting even if a nail or a hole is drilled. It is said that the production cost can be reduced by as much as 60% compared to the current lithium-ion batteries. Sanyo Chemical Co., Ltd. begins mass production and promotes cost reduction. For the time being, the company will sell storage batteries installed outdoors, such as emergency power supplies for power plants and factories. (The Nikkei Shimbun, 19.02.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

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Energy

Aiming to participate in 200 JXTG Energy, ToGas, and Renewable Energy Industry Organizations On January 15th, five companies such as JXTG Energy and announced that they established the "Renewable Energy Long-Term Stable Power Supply Promotion Association". Collaborate on policy recommendations and research and development for METI. The company intends to increase the number of participating companies to 200 companies over the course of one year, and to increase its presence in order to promote the spread of renewable energy and develop related businesses.

Tokyu Real Estate, Orix, and Renewable Japan are also participating in the Association. "We want to contribute through constructive discussions with ministries and agencies to make regenerated energy a stable power supply for a long time," said Chairman of Renewable on the 15th of the press conference.

The association will also work together to own pilot power plants. The company aims to improve its voice as an organization by attracting a wide range of participants, regardless of industry, including renewable energy companies, financial institutions, and large electric power customers. (The Nikkei Shimbun, 15.01.2020)

JERA, Shimizu and Offshore Wind Power On January 15, TEPCO Holdings and announced that they would collaborate in the offshore wind power business with JERA. First, we consider commercialization in Akita Prefecture. Demand for renewable energy is rising in response to the global trend toward "decarbonization," and the two companies intend to accelerate development by leveraging each other's know-how. On the same day, JERA and Shimizu signed a memorandum of understanding. In Akita Prefecture, wind blowing is suitable for wind power generation, and offshore type business development is expected.

JERA aims to raise the capacity of renewable energy to 5 million kilowatts by 2025, which is less than five Source: shutterstock_1091442722 times the current capacity. They are already participating in offshore wind power in the UK and Taiwan. (The Nikkei Shimbun, 15.01.2020)

Furukawa Electric Wireless Charging EVs While Running around 30 Years Co., Ltd. has developed a technology to supply electric vehicles (EVs) with wireless power. By reducing the coil used for the power receiver, the weight of the power receiver was reduced to about one-sixth of that of the conventional type. By 2030, the company will be able to supply electric power to its running EVs, aiming for annual sales of 5 billion yen. To help eliminate the shortage of charging facilities and promote the widespread use of EVs.

Furukawa Electric adopted a method of supplying electric power by using an electric field generated between two electrodes with an insulator interposed therebetween. When electricity is supplied at a high frequency, electricity can be supplied to the opposite electrode by a phenomenon in which electricity flows.

Although the transmission distance is short, it is hardly affected by positional deviation. The company succeeded in an experiment in which it wirelessly delivered 4.7 kilowatts of power to electrodes 9.5 centimeters away. Transmitters are buried under the floor of roads and warehouses, and EVs with power receivers mounted thereon can be recharged between runs.

First, we will develop applications such as small mobility for use in the experiments of the next- generation mobile services "MaaS" and bogies for use in large warehouses of mail order companies. Establish practical technology by 25 years. Since the size of the coil can be made smaller than the conventional one and the material "ferrite" for generating the magnetic field is not used, there is an advantage that the power receiver can be made lighter.

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According to the company, it was the first time in the world to successfully transmit a large-capacity radio power that could power automobiles using this electric field. To power a running EV, more than 10 kilowatts of power must be delivered at a distance of 10 centimeters or more. Furukawa Electric is supposed to establish the technology in 30 years. In wireless power feeding for EVs and hybrid vehicles, a system using a magnetic field has become dominant. Furukawa Electric intends to encourage its adoption in areas such as small-sized EVs where standardization is not in progress. (The Nikkei Shimbun, 25.01.2020)

Issues to invite industry to offshore wind power and base port development in Kitakyushu The creation of a major offshore wind power generation base promoted by Kitakyushu City is on the rise. Initiatives to construct large offshore wind farms and to designate national base ports are leading the way, and the first large international conference will be invited in October. Hold the base port to support western Japan's offshore wind power.... As there were some adverse winds such as the withdrawal of Japanese manufacturers in the wind power generation field, the question of how far the base port which gathered the related industries should be realized was explored.

Kitakyushu City attracts demonstration aircraft for offshore wind power, northern development of maintenance and management (Asahikawa City, Hokkaido), and bearing manufacturers. When the government enacted the revised Port and Harbor Law to encourage the introduction of offshore wind power in port areas in 2016, it took the first time in Japan to solicit offshore wind farm operators.

In 2017, we selected Hibiki Wind Energy Co., Ltd. (Kitakyushu City), a company representing Kyuden Mirai Energy Co., Ltd. (Fukuoka City). MHI Vestas (Denmark), which is the world's largest producer of wind turbines and Mitsubishi Heavy Industries, decided to use wind turbines in 2016. The Company also plans to use the Kitakyushu Port as its base for the SEP Carrier installation service.

The offshore wind power with a total output of more than 220,000 kilowatts will be constructed from FY2022, and the construction of the base port will be preceded by the shipment of parts and materials. As we have seen so far, the realization of industrial clusters, such as parts manufacturers and processing and assembly bases, has become a challenge in the future.

Partial amendments to the Port and Harbor Law, including long-term wharf loans, were passed at an extraordinary session of the Diet in November 2019. Kitakyushu City invests 2.7 billion yen, and it is urgent to develop a quay that withstands heavy objects. Is it possible not only to generate electricity, but also to become one of Japan's leading offshore wind industry clusters? Initiatives by the government and government are being questioned. (The Nikkei Shimbun, 27.01.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 20

General Industry Development

Decline in machinery orders in December 2019: 12.5%. According to the Cabinet Office's statistics on machine orders in December 2019 released on February 19, orders for private demand excluding ships and electricity, which is a leading indicator of capital investment, fell 12.5% month-on-month to 824.8 billion yen, the first negative in two months. Machinery orders in the manufacturing industry increased 4.3% month-on-month to 372.6 billion yen, up for the second consecutive month. Non-manufacturing machinery orders fell 21.3% month-on-month to 466 billion yen, down for the first time in two months.

The 12.5% decline in private demand has been the largest since the 17.0% decline in September 2018. However, the assessment of the economy in December has been deferred to "stepping on the floor." Although there was a reactionary fall in large orders for railcars in November 2019, "there is no sharp drop in a few months" (Economic Statistics Division).

In December, the manufacturing industry saw an increase in computers and nuclear power in the electrical machinery industry. In the general-purpose and production machinery industry, electronic application equipment and engines grew.In the , sales of motors and chemical machinery grew, but in the automobile and accessories industries, transportation machinery and in the steel industry, boilers decreased.

Private demand excluding ships and electricity in 2019 fell 0.7% from the previous year to 10,432.3 billion yen, the first negative in two years. Among them, orders for machinery in the manufacturing industry decreased 9.2% from the previous year to 4,431.8 billion yen, down for the first time in three years. Machinery orders in the non-manufacturing industry increased by 6.6% year-on-year to 6.2 trillion yen, rising for the first time in three years, due to contributions from large-scale projects such as railway vehicles and cash register countermeasures.

The forecast for “private demand excluding ships and electricty” for the January-March 2020 period is 2,432.6 billion yen, a 5.2% decrease from the previous year. Private demand in the manufacturing sector is expected decrease by 3.9% from the previous year to 1,042.7 billion yen, and that in the non- manufacturing sector by 6.7% to 1,419.0 billion yen.

Regarding the outlook, Daiwa Institute of Research says, "It will decrease gradually. The increased uncertainty due to the new coronavirus will also be a risk factor." (Nikkan Kogyo Shimbun, 20.02.2020)

Impact of COVID-19: Medium-sized machine tool makers are suffering due to stagnant domestic production due to delays in parts delivery The impact of the new coronavirus has spread to small and medium-sized domestic business of machine tools. A number of japanese machine tool makers have been forced to suspend or partially operate production, with Chinese factories unable to operate from the Chinese New Year and the schedule for resumption is not clear. In the domestic business, there are various aspects such as delays in delivery of Chinese parts in production, lost sales opportunities due to cancellation of exhibitions, and postponement of shipments due to cancellation of overseas customers coming to Japan.

Kiwa Machinery Co., Ltd. relies on overseas for almost all of its castings. Procurement sources include China, Taiwan, and Korea by model. Of these, castings made in China are delayed for 1.2 months, hindering the production of the corresponding machine tools. Niigata Machine Techno Company manufactures castings using special wooden molds, and it is difficult to change suppliers. Therefore, it does not stand the prospect still in the delivery time. It is said that there will be a sufficient stock for the time being, but if this situation continues, it is necessary to consider changing to the "full mold casting method", which can be costly and not suitable for mass production. However, it is difficult to reflect the increased costs in the price. (Nikkan Kogyo Shimbun, 03.03.2020)

Industrial machinery orders fell 4.5% in 2019 to 4,844.0 billion yen, down for the first time in two years The value of industrial machinery orders in 2019, announced by The Japan Society Of Industrial Machinery Manufacturers (JSIM) on February 17, was 4.584 trillion yen, down 4.5% from 2018. It turned down for the first time in two years from 0.7% increase in 2018. Processing machinery for the manufacturing industry slumped due to US-China trade friction. Natural gas-related orders were weak, and external demand dropped sharply. VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 21

Domestic demand increased 3.6% to 3,042.5 billion yen, while export contracts of approximately 70 major companies, representing external demand, fell 20.3% to ¥ 1,308.7 billion. By type, chemical machinery, which had the largest value, fell 20.5% to 1,224.3 billion yen. Although there were large orders for natural gas plants related to external demand in 2018, they did not perform in 2019. Plastics processing machinery decreased 20.3% to 26.2 billion yen. The drop in automotive-related investment had an impact. Metal processing machinery also fell 35.2% to 117 billion yen. Investment in steel and non-ferrous metals fell due to global overcapacity. (Nikkan Kogyo Shimbun, 17.02.2020)

Mio. yen Industrial Machine order, monthly, 2018-2019 600.000

500.000

400.000

300.000

200.000

100.000

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 2019

Domestic demand Foreign demand

Source: JSIM

Industrial machinery orders 4.5% increasing will be expected FY2020, but not including the impact of COVIT-19 JSIM announced on February 28 that the order value of industrial machinery in 2020 will increase by 4.5% to 5,161.3 billion yen from the forecast in 2019. JSIM expects natural gas-related investments to fall in FY2019 and domestic capital investment to recover for the first time in two years. However, he did not take into account the effects of the spread of the new coronavirus infection, and said that the effects would not be unavoidable if prolonged.

Domestic demand is expected to increase by 4.2% and external demand is expected to increase by 5.0%. External demand is expected to increase demand for chemical machinery, pumps and compressors due to increased investment in natural gas. In domestic demand, capital investment, which had been postponed mainly by the processing and material industries, is expected to recover in response to the next-generation communication standard "5G" and the electrification and autonomous driving of cars. Thermal power facilities for electric power are tough, but investment in biomass power generation will remain high.

The impact of the new Corona is likely to be due to sluggish sales activities in China and a decline in willingness to make capital investments. Industrial machinery has different delivery times for each product, and the Association believes that the effects will be more apparent from pumps and plastic processing machines with shorter delivery times.

In FY2019, total domestic and foreign demand is expected to decrease 5.5% from FY2018 to ¥ 4.909 trillion. Sales to the manufacturing industry are sluggish, and orders for iron making and transport machinery are decreasing. (The Nikkei Shimbun, 28.02.2020)

Machine tool orders 32% decrease in 2019 Slow automobile and US-China friction According to the orders received by Japan Machine Tool Builders’ Association (JMTBA) on January 23, 2019, total annual orders fell 32.3% to ¥ 1,229.9 billion, down for the first time in three years. The automobile-related slump was clear, with orders from the domestic automobile-related industry falling 43.7% to ¥ 139.8 billion. The US-China trade dispute also reduced the willingness of the manufacturing industry to invest. Annual orders totaled 493.2 billion yen, down 34.3% in domestic demand, and 736.7 billion yen, down 30.9% in external demand.

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 22

Looking at external demand by region, exports to Asia decreased by 38.2% to ¥ 295.8 billion, exports to Europe decreased by 27.5% to ¥ 177.2 billion, and exports to North America decreased by 24.4% to ¥ 26.2 billion, falling sharply across the board. China's demand was sluggish due to the US-China friction, and the European economy slowed down. Machine tool orders for the month of December 2019 fell 33.5% year-on-year to ¥ 90.1 billion, falling below the previous year's results for 15 consecutive months.

Orders from the domestic automobile industry were sluggish. However, sales of semiconductor manufacturing equipment and agricultural machinery were strong, and external demand was also strong in North America. In North America, there were several large automotive-related projects.

JMTBA expects annual orders in 2020 to be slightly lower than 2019, at 1.2 trillion yen. Many expect this to be a recovery from the current level of orders and to expand semiconductor-related investments related to the next-generation communication standard "5G" and to progress on discussions on trade friction between the United States and China. (The Nikkei Shimbun, 23.01.2020)

Mio. yen Machine tool order (2012-2020) 1.200.000

1.000.000

800.000 736.712

600.000 493.188

400.000

200.000

- 2012 2013 2014 2015 2016 2017 2018 2019 Domestic demand Foreign demand

Source: JMTBA

Machine tool orders of seven major companies in 2019, down 29%, Summary of Nikkan Kogyo Shimbun Compared to the first half of the same year, Machine tool orders (in Mio. yen, change rate YoY) orders received by each company for Makino 2019 Demestic Export Milling decreased 28.6% compared to the first 81,902 28,772 53,180 half of the same year due to the suspension of Makino the shipment and production of Boeing's -23.3% -28.8% -20.0% 737MAX, and Okuma decreased 21.7%. Orders 125,787 58,885 66,902 Okuma related to automobiles declined and fell 38.9%. -33.9% -36.2% -31.7%

14,617 9,946 4,671 Tsugami, which has a high local market share, OKK decreased by 15.3% compared to the first half of -42.3% -36.9% -51.2% the year. Toshiba Machinery's exports increased 24,846 15,062 9,784 Toshima Machine in the calendar year 2019 due to steady sales of -14.9% -22.7% 90.0% precision processing machines for optics in 48,397 21,904 26,493 China and Taiwan, as well as capturing demand JTEKT for industrial and construction machinery. -25.0% -23.0% -26.6% 53,338 8,415 44,923 Tsugami In Japan, orders for semiconductors and robots, -19.1% -40.4% -13.3% which were strong in 2018, fell. Mitsubishi Heavy 20,479 12,870 79,609 Industries Machine Tools has concluded a large MHI Machine Tool business negotiation for aircraft for which final -51.9% -50.5% -54.1% decisions were delayed in December 2019. 369,366 155,804 213,564 7 Companies (The Nikkei Shimbun, 16.01.2020) 29.6% -34.1% -25.9%

Souce: Nikkan Kogyo Shimbun

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 23

Machine tool orders declined by 35% in January, lowest level in 7 years, affected by COVID-19 According to the machine tool orders for January announced by Japan Machine Tool Builders’ Association (JMTBA) on February 20, orders from China fell 35.4% year-on-year to 10.7 billion yen for the 23rd consecutive month. The impact of COVID-9 is small in January, and turbulence is expected after February. In the Chinese market, logistics has been hampered by the effects of COVID-19, and restrictions on travel have hindered employee retention and sales activities.

Total orders in January fell 35.6% to 80.8 billion yen. At the lowest level in about seven years, domestic demand also declined by 36.7%. Domestic demand fell sharply by 44.9% to 10.6 billion yen, mainly due to dies and construction machinery. It is said that some small and medium-sized companies have been waiting for a subsidy that will be open for public offering in March. In addition, US-China trade frictions have been prolonged, and there has been a movement to curb investment due to the slump in the automobile industry.

Orders for February are expected to be significantly affected by COVID19, and are expected to fall further. Despite expectations for a recovery due to the alleviation of US-China trade friction, there is growing concern that new pneumonia has spread over the water and is now fearing bottom cracks. (The Nikkei Shimbun, 20.02.2020)

Mio. yen Machine tool order (Jan.2018-Feb.2020) Mio. yen 150.000 25.000

130.000 20.000 110.000

90.000 15.000

70.000

10.000 50.000

30.000 5.000 10.000

(10.000) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb - 2019 2020

Domestic demand Foreign demand China EU USA

Source: JMTBA

Industrial robot orders decreased by 14% in 2019, Minus for the first time in 7 years Japan Robot Association (JARA) announced on January 24 that the value of orders for industrial robots in 2019 (member base) was 68.3 billion yen, down 14.4% from the previous year. As a result, orders for robots fell for the first time in seven years. Orders received in the period October-December 2019 fell 0.3% YoY to ¥ 16.4 billion, down for the fifth consecutive quarter.

In 2019, total shipments fell 11.1% year-on-year to ¥ 662 billion. Domestic shipments increased 3.3% to ¥ 204.2 billion, while exports fell 16.3% to ¥ 457.8 billion. Exports of welding robots used in the manufacture of automobiles were down 35.6% year-on-year to 59.8 billion yen. (The Nikkei Shimbun, 24.01.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 24

Mio. yen Quarterly order of industrial robots (2017-2019, on member base) 250.000

Order Production 200.000

150.000

100.000

50.000

- 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2017 2018 2019

Source: JARA

Construction machinery shipment value forecast reduced by 3% In 2020, possibility of further downside due to COVID-19 The Japan Construction Machinery Manufacturers Association announced on February 25 that the shipment value of construction equipment in FY2020 will be 2.2229 trillion yen, a 3% decrease from the FY2019 forecast. The forecast was revised down last summer. While demand for Asia and Oceania is improving, demand is sluggish in Europe and elsewhere. The outlook does not take into account the effects of the new coronavirus and carries a further downside risk.

The forecast for FY2020 is 2,229.4 billion yen. It was reduced by about 170 billion yen from the previous forecast (2.4 trillion yen) announced in August 2019. It has been negative for the second consecutive year.

Exports are forecast to decrease by 3% to 1.3 trillion yen and domestic demand to decline by 2% to 867.5 billion yen. Since 1990, when the Japan Construction Machinery Manufacturers Association was established, FY18 is a record high, and although it is a negative forecast, it will be the fifth level in FY3020. Asia and Oceania excluding China are expected to recover. However, in Japan, a reactionary decline in demand ahead of the consumption tax hike has an impact. As for exports, demand in Europe will slow down and momentum will stall.

However, the impact of the new coronavirus, which spreads worldwide, cannot be ascertained. After Chinese New Year, which is Lunar New Year, it is a sales season that sells about 30% of the annual demand. The factories that had forgotten production locally at the direction of the local government are now in operation. The actual status of the supply chain, including local manufacturers that procure parts, will be known from now on, and full-scale operation is likely to take some time. (The Nikkei Shimbun, 26.02.2020)

OSG acquires three European companies and businesses ・ Acquires EV support and new sales channels Cutting tool maker OSG has recently acquired three European companies and businesses. The total purchase price is expected to be about 6 billion yen. As the automotive industry of major customers enters a “reform period once every 100 years” such as electrification and self-driving cars, the company will improve its competitiveness by expanding its business partners and offering a wide selection of tools that demand is expected in electric vehicles (EVs).

OSG mainly deals with cutting tools used in machine tools. The company produces taps for making screw holes, drills for making holes, and rolling dies for processing screws. The main product tap has about 30% of the world's top share.

In Germany OSG acquired cutting tool manufacturer, BASS GmbH & Co. KG and the cold forming business of machine tool manufacturer, MAG. Bass specializes in designing and manufacturing special tools in a short period of time. More than 50 percent of its sales originates from Germany. MAG's tool business includes rolling dies and tool manufacturing machinery. Specializing in tools for automobile driveshafts that transmit power to tires, sales reach about 10 million euros (about 1.2 billion yen).

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 25

Demand is expected for drive shafts as indispensable parts in popular EVs. Increase the number of compatible tools to meet the needs of complete vehicle manufacturers and mega suppliers.

In Italy, it acquired diamond tool manufacturer Fiudi. The sales are about 6 million euros (about 720 million yen). At manufacturing sites, multi-task machines and 5-axis machines that can consolidate multiple machining processes are becoming widespread. On the other hand, diamond tools are used for roughing and other metal finishing, and demand is expected to continue in the future. (The Nikkei Shimbun, 28.01.2020)

IDEC triples product line by adding Weidmüller products IDEC, a major industrial switch, announced that it will expand three times its lineup of products that simplify wiring of control devices. IDEC adopts connection method called "push-in" and can wire if we push with finger-tip without using tool. In Japan, the method of wiring using a screw type driver is the mainstream, but it took time and effort. Until now,

IDEC has been dealing with 500 product numbers, but we are launching new push-button switches used to stop equipment and increasing the number to 1500 Source: shutterstock_574251076 product numbers. It is assumed to be used in machine tool and food industry factories. IDEC is aiming for sales of 3 billion yen by 2024 with push-in products. (The Nikkei Shimbun, 16.01.2020)

Toshiba Carrier will invest 3 billion yen for new plant in Poland Toshiba Carrier, a Toshiba air-conditioning subsidiary, will invest approximately 3 billion yen to open a new plant in Poland. The building and land have already been acquired and will be operational by 2020. Having set up factories in Thailand and other markets to develop the Asian market, the company will set up a production system in Europe, where environmental concerns are growing. In FY2024, sales will be raised to 300 billion yen, 1.5 times that of FY2018.

The plant will be set up in Gniezno, in central and western Poland, to produce commercial air conditioning and household water heaters. Aim for a production system with 200 people in 1-2 years. The company's sales in the European market are just over 10% of the total. The company will export products from Thailand and Japan to local production, reducing production time to two-thirds.

In Europe, the air conditioning industry is growing due to the heat wave in recent years and the tightening of environmental regulations. Among Japanese-affiliated manufacturers, Daikin Industries, Mitsubishi Electric and others have been moving to acquire local related companies. This is the first time for Toshiba Group to establish a new manufacturing base in Europe in about 13 years. (The Nikkei Shimbun, 21.01.2020)

Toshiba receives order for locomotive production in Europe Toshiba Infrastructure Systems announced on January 23 that it has received an order in Germany for the production of 50 hybrid locomotives powered by diesel power and lithium-ion batteries. The value of the order is expected to be around 20 billion yen, and the plant will be manufactured at a German railway subsidiary's plant. This is the first time the company has received an order for a locomotive in Europe. The company's locomotives can reduce emissions by 30% compared to regular diesel locomotives, and comply with European environmental regulations.

The company received an order from a German railway freight railway subsidiary for the design and manufacture of locomotives. The output is 750 kW, and the battery is equipped with a lithium-ion battery "SCiB" developed by Toshiba.

It has a longer life than conventional batteries and is suitable for storing regenerative power generated during braking. Production will start in Germany in 2021 and delivered sequentially from 2022.

Toshiba has positioned its railway business as a growth business in its medium-term management plan “Toshiba Next Plan”, which began in FY2019. Overseas, the company operates mainly in Taiwan and China, but will also expand its focus in Europe. (The Nikkei Shimun, 23.01.2020)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 26

Daihen acquires German robot system integrator Expands arc welding for European vehicles Daihen recently acquired about 90% of the shares of LASOtech Systems GmbH and made it a subsidiary. The price of the acquisition was not disclosed. LASOtech's sales are about 2 billion yen. The company, which has the world's top share in the arc welding robot market, will strengthen its arc welding robot business in Europe, where local manufacturers are strong.

LASOtech handles integrating systems in a wide range of fields, including laser welding robots and handling robots, for major European auto and home appliance manufacturers. Provide consistent production line automation, including handling required before and after arc welding. Incorporate LASOtech's customer network and system integration know-how to strengthen proposals for the automotive industry.

As a European strategy, Daihen relocated its European subsidiary headquarters to Munich in 2016 and strengthened its sales structure in southern Germany, where the automotive industry is concentrated. However, the main focus was on small and medium-sized business proposals through sales agents. Going forward, the company will leverage its sales network to expand its direct sales business for major companies. Aim for a 10% market share and net sales of 10 billion yen by 2020 in the arc welding robot business in Europe. Source: shutterstock_602924879 (Nikkan Kogyo Shimbun, 21.01.2020)

Kubota up to 300-hp engine mass production in 2023, plan to sell to other construction machinery manufacturers Corporation will develop its largest diesel engine with an output of 300 hp. It will be mass- produced in 2023 and sold to construction and industrial machinery manufacturers. Although Kubota was late for large engines business, it was easier to design machines by making it more compact than the competition.

Kubota develops the "S7509". It is a 6-cylinder engine with a displacement of 7,500cc. It will be installed on forklifts, crane trucks, etc., as well as hydraulic excavators used for large-scale construction such as airports, highways, and sports facilities. It will meet the strictest diesel regulations in the world, which began in Europe in 2019, and expect demand in North America and elsewhere. The company sells engines in addition to its own agricultural and construction machinery. It is strong in small engines and has the world's top market share for industrial diesel engines with less than 100 horsepower. Large- sized vehicles such as the U.S. Deer are strong overseas, and Kubota's maximum output engine so far was 200 horsepower.

Kubota, which specializes in downsizing machines, will design a new engine with a compact design and strengthen sales to machine manufacturers working on upsizing of machines. (The Nikkei Shimbun, 02.03.2020)

Kubota launches large North American tractor in Japan Kubota Corporation will launch its largest tractor in Japan, which will be launched in North America. The demonstration test will be started in Hokkaido this summer, and it is scheduled to be sold in 2-3 years. Demand for large agricultural machines that can efficiently cultivate large arable lands is increasing in Japan due to the consolidation and consolidation of agricultural lands, but Westerners such as the U.S.A. are leading the way. Kubota, the largest domestic agricultural machine, is expanding its assortment of products. Source: shutterstock_653708227 Ask dairy farmers in Hokkaido to use Kubota's largest model "M8" (190-210 hp) to confirm its practicality. Until now, the largest model sold in Japan was the "M7" (130 to 170 horsepower). The M8 is outsourced to a Canadian company and will be released in North America in March. Change parts and designs to meet Japanese standards. Tractors are used to tow tools that perform tasks such as tilling and fertilizing. In order to work efficiently on large farmland, a machine that can handle large instruments is indispensable. In Hokkaido, etc., the concentration of farmland is increasing and the scale is increasing due to a shortage of successors. However, at 190 hp or more, there are strong deer and European CNH industrial companies with vast know-how on field action. (The Nikkei Shimbun, 25.02.2020) VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office 27

Exhibitions

Canceled trade show (as of March 19, 2020)

April • Japan International Welding Show 2020 • Industry-Frontier 2020 (April 08 - 10, Makuhari) • Techno-Frontier 2020 (April 08 – 10, Makuhari) • Intermold 2020 Osaka (April 15 – 18, Intex Osaka) • 2020 Japan Meat Industry Fair 45th (April 15 – 17, Tokyo BigSight)

May • Japan International Apparel Machinery & Textile Industry Trade Show (JIAM 2020 OSAKA)

Postponed trade show Trade Show Initial appointment New appointment MEX Kanazawa 2020 May 21-23 Oktober 29-31

Following trade shows will be feld April 2020

OPIE’20: OPTICS & PHOTONICS International Exhibition • Laser Expo • Lens EXPO (Design & Manufacturing) Name of the Exhibition • IR+UV EXPO (Applied Technology) • Industrial Camera & Advanced Imaging EXPO • Space & Astronomical Optics EXPO • Positioning EXPO

Date 22.04.2020 - 25.04.2020 Location Pacifico Yokohama URL https://www.opie.jp/en/ Organizer NPO Japan Photonics Council

Visitor number 16.103 (including: 492 foreign visitors) Exhibitor number 372 (including: 53 foreign exhibitors)

Manufacturing World Nagoya 2020 • 5th Design Engineering & Manufacturing Solutions Expo Nagoya • 5th Mechanical Components & Materials Technology Expo Nagoya • Name of the Exhibition 4th Factory Facilities & Equipment Expo Nagoya • 4th Aerospace Technology & Components Expo Nagoya • 2nd Additive Manufacturing Expo Nagoya • 1st Industrial AI/IoT Expo Nagoya • 1st Measure/Test/Sensor Expo Nagoya Date 15.04.2020 - 17.04.2020 Location Portmesse Nagoya URL https://www.japan-mfg-nagoya.jp/en-gb.html Organizer Reed Exhibitions Japan Ltd.

Visitor number 35.361 (including: 417 foreign visitors) Exhibitor number 1.042 (including: 117 foreign exhibitors)

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

28 Japan Economic and Industrial Scenario, 01/2020 VDMA JAPAN Liaison Office

May 2020 Name of the Exhibition Wireless Japan 2020 • Expo COMM Wireless Japan • Wireless Technology Park (WTP) 2020 • Transport System Expo • International Drone Expo

Date 13.05.2020 - 15.05.2020 Location Tokyo Big Sight, Omi Hall URL http://www8.ric.co.jp/expo/wj/en/ Organizer RIC Telecom / E.J. Krause & Associates, Inc. Visitor number 56,757 Exhibitor number 258

Name of the Exhibition Exposition Yokohama 2020 Date 20.05.2020 - 22.05.2020 Location Pacifico Yokohama URL https://expo.jsae.or.jp/english/ Organizer Society of Automotive Engineers of Japan, Inc. Visitor number 95,900 Exhibitor number 600

Name of the Exhibition The Total Solution exhibition for Electronic Equipment • JPCA Show 2020 • 2020 Microelectronics Show • JISSO Protec 2020 • Total Organic Devices Expo 2020 • Wire Japan Show 2020 • Smart Sensing 2020 • JEP/TEP Show

Date 22.05.2019 - 24.05.2019 Location Tokyo Big Sight URL https://www.jpcashow.com/show2020/en/ Organizer Japan Electrical Construction Association (JECA), etc. Visitor number 44,110 Exhibitor number 507

VDMA-Newsletter “Japan”, Edition 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444

29 Japan Economic and Industrial Scenario, 01/2020 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 01/2020 Contact: Oliver Wack, Telephone: +49 69 6603-1444