Auto sector adds spark to Japan's electronic components industry

Tue Nov 26, 2013 4:03pm EST
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By Nobuhiro Kubo and Yoshiyuki Osada

TOKYO/OSAKA (Reuters) - Japanese electronic component makers are looking beyond a fickle smartphone market that once lured them with rocketing growth, tying their fortunes more closely to the most resilient of Japan's big industries: automobiles.

Component makers such as Murata Manufacturing Co Ltd (6981.T: Quote) and TDK Corp (6762.T: Quote) are capitalizing on rising demand for electronics like those that make cars safer with automatic braking or less polluting with engine controllers.

In contrast, Murata and others are having an up-and-down ride shipping components for Apple Inc's (AAPL.O: Quote) iPhones, while declining smartphone orders were a factor in January when TDK slashed its full-year operating profit forecast.

The auto industry offers a stable alternative, especially because of the enduring prominence of compatriot automakers such as global leader Toyota Motor Co (7203.T: Quote). The value of electronic components per car will grow 26 percent over the decade to 2022, according to Fuji Chimera Research Institute.

But the payoff may not be as quick and will favor those with a longer history in the business.

"TDK and Murata were early to start working in automobiles and are strong there," said Manabu Akizuki, executive director at Nomura Securities. "Moving into automobiles is not so difficult but it takes 10 years to bear fruit."

Murata is the world's largest maker of ceramic capacitors used to control power supplies in electronic gadgets. It gets 40 percent of its sales from smartphones, including the iPhone for which it has been a major supplier since 2010.

Orders were hit earlier this year when Apple curbed output of the iPhone 5. It now aims to rely less on smartphones and boost autos' share of sales to 20 percent from 15 percent.   Continued...

Panasonic Corp's lithium-ion batteries, which are part of Tesla Motor Inc's Model S and Model X battery packs, are displayed in front of a poster of a Tesla Model S during a news conference at the Panasonic Center in Tokyo, ahead of the 2013 Tokyo Motor Show, November 19, 2013. REUTERS/Yuya Shino