Japan's electronics manufacturers: "mono zukuri"

(c) 2015 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (25th edition) June 18, 2015
JAPAN’S ELECTRONICS MANUFACTURERS
“MONO ZUKURI”
25th Edition, June 18, 2015
by Gerhard Fasol, PhD, Eurotechnology Japan KK
http://www.eurotechnology.com/
fasol@eurotechnology.com
this is a preview version with selected pages from the full report.
download the full report here: http://www.eurotechnology.com/store/j_electrical/
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2 March 17, 2009
3 March 22, 2009
4 March 23, 2009
5 July 3, 2009
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7 July 4, 2009
8 July 5, 2009
9 July 10, 2009
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11 January 18, 2011
12 October 1, 2012
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16 January 4, 2013
17 January 28, 2013 document management companies: Ricoh and XEROX

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Version Date Changes
18
19 May 9, 2013 SONY updated, ﬁnancial results updated
20 May 16, 2013 FY2012 data for Big-8 electronics makers added
21 May 18, 2013 Analysis added
22 August 4, 2103 Analysis added
23 September 25, 2013 Tokyo Electron / Applied Materials merger added
24
25 June 17, 2015 ﬁnancial data, revision and updates

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4

EXECUTIVE SUMMARY:
JAPAN’S ELECTRONICS MANUFACTURERS
5
Japan’s “Big 8” electronics companies (Hitachi, Panasonic, SONY, Sharp,Toshiba, Mitsubishi Electric, Fujitsu, NEC) combined have about
US$ 600 Billion in revenues (sales), of similar economic size as the Netherlands, and have an important position in the global economy.
Especially SONY is often described as “iconic”.
While these top 8 Japanese electronics companies were dominating global electronics markets in the 1980-1990s, during the last 15
years they have not grown- combined compound annual growth rate is approximately zero, and their combined total profits over the
last 15 years has been also approximately zero: essentially zero growth and zero profits for more than 15 years.
While these companies still file very large numbers of patents, produce very important products, and their components are important
for global supply chains, possess important technology, for a combination of factors, they have not succeeded to achieve their potential.
Recently, the financial position of SONY, Sharp and Panasonic have deteriorated substantially, and Sharp management has announced
that the survival of the company is in danger.
 
Overall these companies present extraordinary opportunities for improvement of performance.
The second part of this report focuses on Japan’s top 7 electronic component makers (Murata, Kyocera,TDK,Alps Electronics, Nidec,
Nitto Denko, Rohm).The financial position (growth and profits) of this group of companies is very much better positioned, they
represent about 30%-40% of the global component market.The global electronics components market is estimated at around US$
140-170 billion in 2012 and growing at an annual rate of around 10% to US$ 220 billion in 2017. However margins of Japan’s electronic
component makers are overall declining, indicating increasing competition especially from China and South Korea, and that changes of
business models, faster innovation or other action is necessary. Japanese electronics parts companies react in several ways to these
challenges, especially also by overseas acquisitions of technology rich companies.
Japan’s electrical companies embrace and celebrate “mono zukuri” (= craftsmanship, making things, the art of making things) as their
core virtue.They emphasize manufacturing perfection as a competitive advantage.

JAPAN’S ELECTRICAL INDUSTRIES
6
This report focuses on 15 companies (plus a few other companies, such as Nintendo and Canon)
(numbers in brackets are the code numbers at theTokyo Stock Exchange):
•Japan’s 8 major consumer electronics makers
•Hitachi Seisakusho (6501)
•Panasonic (6752)
•SONY (6758)
•Mitsubishi Electric (6503)
•Sharp (6753)
•Toshiba (6502)
•Fujitsu (6702)
•NEC (6701)
•Japan’s 7 major electronics component makers
•Murata (6981)
•Kyocera (6971)
•TDK (6762)
•Alps Electronics (6770)
•Nidec (6594)
•Nitto Denko (6988)
•Rohm (6963)

AGENDA - LIST OF CONTENTS
7
•Executive summary
•“mono zukuri” (= making things) as a philosophy and business model
•Branding
•“Galapagos effect”, Japan-Focus vs. globalization, and business model issues
•Keiretsu industrial family bonds
•Japan’s 8 major consumer electronics manufacturers
•Industry sector overview, ﬁnancial analysis and trends
•Company overview and analysis
•Japan’s 7 major electronic component makers
•Industry sector overview, ﬁnancial analysis and trends
•Company overviews and analysis
•Other companies covered in this report
•Nintendo
•Canon, RICOH
•Oki
•Citizen
•Summary

“MONO ZUKURI”=
THE ART OF MAKINGTHINGS
8

JAPAN’S ELECTRICAL
CONGLOMERATES NEED A
CHANGE OF BUSINESS MODEL
10

JAPAN’S ELECTRONICS PARTS MAKERS SHOW STRONG INCOME,WHILETHETOP-8 ELECTRONICS
GROUPS COMBINED HAVE CLOSETO ZERO INCOME
12
•Japan’s top-7 electronics parts (right hand side ﬁgure) makers show strong income
growth
•Japan’s top-8 electronics groups (left hand side ﬁgure) combined show almost zero
income over 17 years
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-2000
-1000
0
1000
netincome(YENbillion)
Japan's 8 electronics manufacturers (annual net income)
US$ -25 billion
US$ -20 billion
US$ -15 billion
US$ -10 billion
US$ 5 billion
US$ 10 billion
US$ 15 billion
Hitachi
Panasonic
Sony
Mitsubishi Electric
Sharp
Toshiba
Fujitsu
NEC
Lehman
shock
(c)2015EurotechnologyJapanKK
www.eurotechnology.com
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-200
0
200
400
600
Japan's 7 major electronics component makers (annual net income)
US$ -2 billion
US$ 2 billion
US$ 4 billion
US$ 6 billion
Murata
Kyocera
TDK
ALPS
NIDEC
NITTO
ROHM

GLOBALIZATIONVS JAPAN’S
“GALAPAGOS EFFECT”
16

JAPAN’S “GALAPAGOS EFFECT”
17
“Galapagos effect” is a term which has been used since about 2005 even by Japanese
Government to describe a situation, where Japanese companies develop new
technologies, and bring new services and business models to Japan’s market, but fail to
capture global value.
The term “Galapagos effect” is often used to characterize Japan’s pioneering
development of mobile internet and mobile internet phones starting with DoCoMo’s i-
Mode in 1999, while Japanese mobile phone handset makers failed to capture global
market share.
Another similar example is electronic money and mobile payments, which Japan
introduced much earlier than other countries, but where Japanese companies failed to
make global impact or capture global value.
Recently this term is used much more broadly in many areas, and is also used to
characterize the current crisis of Japan’s electronics industry, especially SONY, SHARP
and Panasonic.

“POST GALAPAGOS STUDY GROUP”
25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR
ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT”
20
see: http://www.eurotechnology.com/2013/10/07/galapagos/
and: http://www.eurotechnology.com/2013/08/05/galapagos-2/

25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING FOR ONEYEAR
ON CONCEPTSTO OVERCOME JAPAN’S “GALAPAGOS EFFECT”
21
see: http://www.eurotechnology.com/2013/10/07/galapagos/
and: http://www.eurotechnology.com/2013/08/05/galapagos-2/

RESULTS OFTHE GALAPAGOS WORKING
GROUP
22
Recommendations to:
1. telecom operators
2. equipment makers
3. content companies
Critical factors for success:
1. people and diversity
2. focus (restructuring)
3. international from day 1
4. speed

THE KEIRETSU FAMILY BONDS
NEEDTO RELAX WITH HISTORY
- BUT KEEPTHE GOOD PARTS
24

BRAND
26

BRANDS
27
Japanese electrical companies have underestimated the importance of brands.
Panasonic is ranked No. 78 by Interbrand
0
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BrandvalueUS$Billion
CocaCola1
IBM2
NOKIA5
Toyota6
SONY25
Nintendo40
Blackberry73
Panasonic78
Motorola87
Brand value 2008, Source: Interbrand

JAPAN’S “TOP-8”
ELECTRONICS
MANUFACTURERS
29

JAPAN’STOP-8 ELECTRONICS
MANUFACTURING GROUPS
30
•Japan’s “top-8” electronics manufacturers combined have about US$ 450 billion in sales, similar
in size to the economy of the Netherlands.
•Hitachi
•Panasonic
•SONY
•Mitsubishi Electric
•Sharp
•Toshiba
•Fujitsu
•NEC
•Combined, the “big 8” electronics companies have
•revenues = ¥ 42,444.3 billion (US$ 414 billion)
•net losses = ¥-909 billion (US$ -8.9 bill)
•combined market cap = ¥ 14,732 billion (US$ 144 billion) (compare to:Apple’s market cap
of US$ 410 Billion, and GE’s market cap of US$ 240 Billion).

JAPAN’S ELECTRONICS SECTOR HAS SHRUNK IN GLOBAL
IMPACT AND MARKET CAP
33
Because Japan’s electronics sector has little prospect for growth unless dramatic restructuring and management changes are done,
currently market capitalization is comparatively low.
In the current smart-phone battles between the Apple camp and the Google/Samsung camp, Japanese electrical makers have little
impact.
The combined market cap of all Japanese electronics makers is very much smaller than Apple’s, Samsung’s, Microsoft’s or Google’s
alone.
The challenge for Japan is to either create sufﬁcient new companies such as SoftBank, and/or to revive the traditional “Big-8” and other
large corporations to create growth and value comparable to Google, Samsung,Apple, Microsoft et al.
Apple & MS camp Google Android camp Japan's Big 8
0
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marketcapUS$Billion
Apple $ 407 B
Microsoft $ 281 B
Oracle
eBay
Google $ 301B
Samsung $ 202B
HTC
LG
Motorola Mobility
Hitachi
Panasonic
SONY
Mitsubishi Electric
SHARP
Toshiba
Fujitsu
NEC
market caps May 15, 2013
c2013EurotechnologyJapanKK
Apple & MS camp Google Android camp Japan's Big 8
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600
800
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marketcapUS$Billion
Apple $ 625 B
Microsoft $ 250 B
Oracle
eBay
Google $ 246B
Samsung $ 177B
HTC
LG
Motorola Mobility
Hitachi
Panasonic
SONY
Mitsubishi Electric
SHARP
Toshiba
Fujitsu
NEC
market caps Oct 2012

JAPAN’S 8 MAJOR ELECTRONICS MAKERS
36
Japan’s top 8 electrical groups combined and averaged over the last 17 years have achieved essentially zero net
profit (actually net average annual losses ofYEN 12 billion/year). Losses in difficult years wipe out the profits
achieved in good years.
This fact demonstrates that the business model of these groups is not sustainable, and will need to be changed
via restructuring.At the same time, these groups own excellent technologies, therefore represent “hidden
value”.
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-2000
-1000
0
1000
Japan's 8 electronics manufacturers (annual net income)
US$ -25 billion
US$ -20 billion
US$ -15 billion
US$ -10 billion
US$ 5 billion
US$ 10 billion
US$ 15 billion
Hitachi
Panasonic
Sony
Mitsubishi Electric
Sharp
Toshiba
Fujitsu
NEC
Lehman
shock

NO REVENUE GROWTH FOR 17YEARS
41
Japan’s top-8 electronics groups show no growth over 17 years - combined and each
separately, except for moderate growth of Hitachi.
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sumofannualrevenues(BillionYEN)
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US$ 200 Bill.
US$ 300 Bill.
US$ 400 Bill.
US$ 500 Bill.
US$ 600 Bill.
Sum of annual revenues of Japan's top 8 electronics makers
mean annual revenue
(FY1997 - FY2014)

HITACHI
“INSPIRETHE NEXT”
44

HITACHI
Hitachi = named after Hitachi town, where the company was founded.
part of the historic Dai-Ichi Kangin keiretsu
Founded
1910 by Namihei Odaira as a repair shop, and to produce Japan’s ﬁrst
electrical motors
Founder Namihei Odaira
Headquarters Chiyoda-ku,Tokyo
Stock Exchange TokyoTSE 6501
Consolidated sales YEN 9,665.8 Billion (US$ 122 Billion) (FY2011, ended March 31, 2012)
Number of employees 323,540, consolidated (March 2012)
Major share holders
Major business areas industrial infrastructure.Trains, power stations, medical equipment.

HITACHI- ANNUAL GROWTH RATE = 0.9% OVER 17YEARS
46
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annualrevenue(YENBillion)
US$ 50 Bill.
US$ 100 Bill.
Annual revenues of Hitachi
Over the period FY1997 - FY2014 Hitachi’s revenues (sales) have grown fromYEN
8416.834 Billion toYEN 9761.970 Billion, ie by an annual compound growth rate
CAGR of 0.9%.

HITACHI - PRESIDENT HIROAKI NAKANISHI
49
President Hiroaki Nakanishi was appointed President of Hitachi in April 2010.
Hiroaki Nakanishi set out to “rebuild a strong Hitachi”, and transform Hitachi into a truly global
company, with the “Hitachi SmartTransformation Project”.
Hitachi now focuses on “social innovation business”, creating sophisticated social infrastructure based
on information technology. Social infrastructure here means transportation, smart cities, electrical
industry, and related social infrastructure.
In particular, extremely unusual for a traditional Japanese corporation, Hitachi recently proposed three
non-Japanese, foreign Board-Members (one internal, Hitachi Europe Chairman, Sir Stephen
Gomersall), and two outside foreign Board Members (PhilipYeo and George Buckley)

HITACHI’S BUSINESS SECTORS
50
Hitachi includes a very wide variety of business segments.
Hitachi includes a very strong IT segment, therefore targets “social infrastructure” as a core business,
where Hitachi can combine strengths in IT with products such as railways, or white goods, or smart
grids and electricity infrastructure
This very wide spread of business segments is an advantage and it’s lack of focus can also be a
disadvantage.
IT 16
Power systems 8
Infrastructure 11
Electronics 10
Construction Machinery 7
Materials 13
Automotive 8
Devices 7
Consumer products 8
Financial Services 3
other 9
Hitachi business sectors

BENCHMARKING
56
In the past Hitachi only compared it’s performance with other Japanese companies. Only now, 2011/2012 did Hitachi start
benchmarking with the best global companies:
This ﬁgure compares Hitachi’s cost structure with two Japanese competitors (A, B) and ﬁve non-Japanese companies
(companies C, D, E, F).
Japanese companies including Hitachi have:
•much higher costs of sales (high production costs)
•lower R&D spending than some competitors
•much lower operating income than non-Japanese competitors
Hitachi decided on a drastic cost-reduction program to increase income to enable growth (source: Hitachi public
presentation)
Hitachi Japanese A Japanese B company C company D company E company F company G
0
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60
70
80
90
100
costs
Benchmarking Hitachi vs Japanese and global competitors
Cost of sales
administrative
R&D
Operating income
previous to 2011 only benchmarking with Japanese competitors was done
Japanese competitors non Japanese competitors

PANASONIC
SLOGAN:“IDEAS FOR LIFE”
58

Panasonic (before Oct 1,
2008: Matsushita)
Matsushita=name of founder
Founded March 7, 1918 as Matsushita Electric Industries Co.
Founder
Konosuke Matsushita, ﬁrst selling lamp sockets, then bicycle lamps
under the brand “National”
Headquarters Kadoma, Osaka, Japan
Consolidated sales YEN 8693 Billion (US$ 110 Billion) (FY ending March 2011)
Number of employees 366,937 (consolidated March 2011)
Major share holders
Major business areas
88 business units. Home appliances,TVs and white goods, components
and devices, digital cameras

-0.9%: NEGATIVE NET MARGIN ON AVERAGE OVER 17YEARS
63
•Panasonic margins averaged over the period FY1998-FY2014 are:
•average operating margin = 2.8%
•average net margin = -0.9%
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annualoperatingmargin(YENBillion) Panasonic
Panasonic operating margin = 2.8%
Panasonic net margin = -0.9%
Sanyo
operating margin

PANASONIC STRENGTHS
64

SANYO, NOW PART OF PANASONIC
SLOGAN:“THINK GAYA”
67

SANYO’S SOLAR ARC, NOW PANASONIC SOLAR ARC
71
•Sanyo’s Solar Ark has 5046 single crystal solar cell battery panels, achieves up to 630kW of solar
power output and delivers about 530,000 kWh of energy per year.The Solar Ark is about 315m long
and weighs 3000 tons.
•Corresponds to a CO2 reduction of 95 tons-C/year
•You can see Sanyo’s Solar Arc from theTokaido-Shinkansen line, if you are seated on the right hand
side of the train between Kyoto and Nagoya station, when taking theTokaido Shinkansen fromTokyo
to Osaka (or left hand side seat when traveling from Osaka toTokyo).

MITSUBISHI ELECTRIC
SLOGAN:“CHANGES FORTHE BETTER”
72

SHARP
FOUNDERTOKUJI HAYAKAWA:
“MAKE PRODUCTSTHAT OTHERS WANTTO
IMITATE”
76

SHARP: MARGINS
85
•SHARP achieved consistently high margins – until the crisis 2009, and aimed for recovery from
FY2010, and now aims for recovery in FY2013…FY2015…
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annualoperatingandnetmargin(%)
Annual margin SHARP (%)
operating margin (%)
net margin (%)

TOSHIBA
SLOGANS:
JAPAN:“LEADING INNOVATION”
GLOBAL:“COMMITTEDTO PEOPLE. COMMITTEDTOTHE
FUTURE”
86

TOSHIBA’S ACCOUNTING
RESTATEMENTS, SPRING 2015
91

TOSHIBA’S ACCOUNTING RESTATEMENTS SPRING 2015
92
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US$ -2 Bill.
US$ -1 Bill.
0
US$ 1 Bill.
US$ 2 Bill.
US$ 3 Bill.
Toshiba operating income restatement
original op. income
restated op. income
•In spring 2015, in a series of announcements,Toshiba declared that some part of their revenues and income
announcements needed restatement.Toshiba announced an internal and an external independent commission
investigating the accounting restatements.
•We have read some of the restatement announcements, and to be honest, ﬁnd them hard to understand.We made a
best effort to show our understanding ofToshiba’s income restatements in the ﬁgure above.
•At this stage the total value of the restatements seems to be on the order of US$ 0.5 billion.
•The underlying reasons for the restatements seems to be underestimation of costs for public infrastructure contracts,
and issues with the accounting for different stages of completion of multi-year projects.

JAPAN EXCHANGE CEO ATSUSHI SAITO USESTOUGH WORDS
REGARDINGTOSHIBA’S ACCOUNTING RESTATEMENT
93
•In a press conference on June 12, 2015 Mr Atsushi Saito, the CEO of the Japan Exchange Group,
which includes theTokyo and Osaka Stock Exchanges, questioned aboutToshiba’s income
restatements, said that “he felt very ashamed forToshiba”, and he felt “very puzzled whyToshiba is so
lazy to check their accounting”.
•Read a full record of Mr Atsushi Saito’s Press Conference here: http://www.eurotechnology.com/
2015/06/14/japan-exchange-group-ceo/

FUJITSU
SLOGAN:“THE POSSIBILITIES ARE INFINITE”
94

NEC
SLOGAN:“EMPOWERED BY INNOVATION”
98

NEC
99
•August 31, 1898 by Kunihiko Iwadare andTakeshiro Maeda, and WalterTenney Carleton, using
facilities bought from Miyoshi Electrical Manufacturing Company.
•July 17, 1899 converted into Joint-Venture with Western Electric Company (US) (the day a new US-
Japan treaty allowed such joint-ventures).Was the ﬁrst Japanese joint venture with foreign capital. First
products: telephones and switches

NEC
Nippon Electric Company (renamed NEC in 1983)
Part of Sumitomo keiretsu
Founded
August 31, 1898 by Kunihiko Iwadare andTakeshiro Maeda and Walter
Tenney Carleton. July 17, 1899 converted to JV with Western Electric
Founder Kunihiko Iwadare,Takeshiro Maeda and WalterTenney Carleton
Headquarters Tokyo, Minato-ku
Consolidated sales YEN 3115 Billion (US$ 39 Billion) (FY2010 ending March 31, 2011)
Number of employees 115,840 consolidated (March 31, 2011)
Major share holders
Major business areas IT/network solutions, mobile/personal solutions, electronic devices

NEC HEADQUARTERS INTOKYO
101

NEC: REVENUES AND INCOME
102
•NEC’s revenues (sales) have been sliding downwards continuously since their peak in 2001.
•NEC’s income averaged over the 17 year period FY1998-FY2014 is
•average annual operating income =YEN 35 billion (US$ 350 million)/year
•average annual net loss =YEN -29 billion (US$ 290 million loss)/year
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Annual income NEC
operating income = ¥ 35 billion
net income = ¥ -29 billion

NEC- MARGINS
103
•NEC’s income/proﬁt margins averaged over the period FY1998 - FY2014 are:
•average operating margin = 1.1%
•average net margin = -0.6% (loss)
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Annual operating/net margin NEC (%)
average operating margin = 1.1%
average net margin = -0.6%

SONY
SLOGAN:“SONY. LIKE NO OTHER.”
104

SONY: INCOME BY SEGMENT
113
•SONY’s fortunes have declined dramatically since the core value moved from device makers to
networks - ie from SONY to Apple/Google/Facebook, and SONY fell back compared to Samsung.
•in the financial year ending March 2013, SONY recorded the first profit in several years, however,
much of this profit is profit on asset sales as shown in the right-most column.
2009 2010 2011 2012 2013
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operatingincomeBillionYEN
SONY operating income by segment Billion
YEN years are Financial Years ending March 31
consumer products & services CPS
professional devices, solutions PDS
pictures movies
music
financial services
mobile SOMC
other
pictures
music
financial
Mobile MP&C
other
Imaging Products IP&S
game
Home Entertainment and Sound HE&S
Devices
US HQ
M3
Osaki HQ
DeNA

JAPAN’S 7 MAJOR
ELECTRONIC COMPONENTS
MAKERS
114

JAPAN’S 7 MAJOR ELECTRONIC
COMPONENTS MAKERS GROW!
115
While Japan’s electrical groups largely face ﬁnancial difﬁculties, low market capitalization, and are faced with the need of restructuring
and search for new business models, Japan’s major electronic component makers (with the exception of ROHM) are generally in a
much better situation.
One major reason for the much better position of Japan’s electronic component makers, is that the component makers typically have a
much more focused business model.They focus on a segment of devices, e.g. ceramic capacitors in the case of Murata, and aim to
achieve a very high global market share and high margins in their chosen segment.
While Japan’s top 8 electrical groups in total represent about US$ 600 Billion/year in sales, the top 7 electronic parts makers represent
a smaller industry sector, in total approx. US$ 60 billion/year in sales.
In this section we focus on the top 7 electronic parts makers (numbers in brackets are theTokyo Stock Exchange codes):
•Murata (6981)
•Kyocera (6971)
•TDK (6762)
•Alps Electronics (6770)
•Nidec (6594)
•Nitto Denko (6988)
•Rohm (6963)

JAPANESE MANUFACTURERS AND APPLE’S I-PHONE
119
Apple costs 23.4
Apple margin 49.1
Japan 9.4
Germany 4.6
S Korea 3.6
USA 1.7China 1
other 7.4
iPhone value analysis WSJ Dec 15, 2010 Asymco
Japan 34
Germany 17S Korea 13
USA 6
China 3.6
other 27
iPhone production WSJ Dec 15, 2010 Asymco
Based on reports we estimate that about 25% of the total price (approx. US$ 800) of each iPhone is for
non-Apple components and assembly.
Out of this 25% segment, Japanese companies are estimated to supply about 34%, mainly components,
such as ceramic capacitors, antenna and displays.This Japanese segment corresponds to approximately
9.4% of end sales price of the i-Phone.
Since Japanese electronic component makers in the best case achieve a 10% profit margin, this Japanese
profit amount corresponds to about 0.9% of each i-Phone, compared to Apple’s approx. 50% profit
margin.

JAPAN’S 7 MAJOR ELECTRONIC COMPONENTS MAKERS
123
Net incomes of Japanese electronic component makers are positive and overall growing
except during downturns (9/11 terror attacks, and Lehman-Shock led to business
downturns).
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-200
0
200
400
600
Japan's 7 major electronics component makers (annual net income)
US$ -2 billion
US$ 2 billion
US$ 4 billion
US$ 6 billion
Murata
Kyocera
TDK
ALPS
NIDEC
NITTO
ROHM

JAPAN’S 7 MAJOR ELECTRONIC COMPONENTS MAKERS
131
average operating margins over the period FY1998-FY2014 is 9.7%
average net margin over the same period is 4.8%
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2000 2005 2010 2015 2020
-30
-20
-10
0
10
20
30
totaloperatingandnetmargin(%)
Total margin (%) of Japan's
top 7 electronic components makers

MURATA
“INNOVATOR IN ELECTRONICS”
“THE WORLD’S NO. 1 SUPPLIER OF PASSIVE ELECTRONIC
COMPONENTS”
132

MURATA
HEAD QUARTERS
BUILDING IN KYOTO
133

Murata Manufacturing Co Ltd family name of the founder Akira Murata
Founded
started in October 1944 by Akira Murata in Kyoto
December 1950 reorganized as Murata Manufacturing Co
Founder Akira Murata
Headquarters Kyoto
Consolidated sales YEN 584 Billion (US$ 7.3 Billion) (FY2011 ending March 31, 2012)
Major share holders
passive electronics components: ceramic capacitors (worlds smallest),
ceramic ﬁlters, ceramic resonators, dielectric ﬁlters

MURATA: RECENT ACQUISITIONS
135
•RF Monolithics (announced April 14, 2012)
•www.frm.com
•wireless connectivity solutions ranging from wireless sensor networks to machine-to-machine
(M2M) technology
•TOKO Inc. (announced March 22, 2012)
•Manufacture of coil products, module products, excellence in metal alloy products
•Purpose: investments from Murata inTOKO will be used for R&D and investment in
manufacturing facilities for power inductors
•Amount of Murata investment inTOKO
•Third party share allocation:YEN 2000 million (US$ 25 million)
•Bonds with share warrants:YEN 1500 million (US$ 19 million)
•Renesas Electronics, Power Ampliﬁer Business and semiconductor Nagano device business unit,
(announced March 1, 2012)
•Purpose is to strengthen Murata’s position in mobile phone front-end modules (FEM)
•Renesas Eastern Japan Semiconductor Nagano will become Komoro Murata Manufacturing Co.,
Ltd.
•Total acquisition price wasYEN 10,740 million (US$ 150 million)
•VTITechnologies Oy (Vantaa, Finland) (announced Oct 11, 2011)
•Total acquisition price wasYEN 18,533 million (US$ 226 million)
•VTI is global leader in MEMS technology, particularly for low-G accelerometers and cardiac
rhythm management (CRM) systems

YEN 1000 BILLIONTARGET FOR 2015 ACHIEVED!
136
•In 2008, Murata announced the sales (Annual Revenues) target of YEN 1000 Billion (YEN 1Trillion)
for 2015.While many Japanese electronics companies fail to achieve such targets (e.g. CANON),
Murata did achieve and exceed thisYEN 1000 Billion sakes target already one year early in FY2014.
•Murata not only achieved this sales target, but also maintained income growth and high margins.
•Murata supplies ceramic capacitors for smartphones, and the growth of the smartphone market,
and their increasing sophistication is driving Murata’s success.
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2000 2005 2010 2015 2020
-100
0
100
200
300
400
500
annualoperating/netincome(YENBillion)
US$ 1.0 Bill.
US$ 2.0 Bill.
US$ 3.0 Bill.
US$ 4.0 Bill.
Annual income Murata
operating income
net income
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2000 2005 2010 2015 2020
0
200
400
600
800
1000
1200
1400
US$ 2 Bill.
US$ 4 Bill.
US$ 6 Bill.
US$ 8 Bill.
US$ 10 Bill.
US$ 12 Bill.
US$ 14 Bill.
Annual revenues Murata

MURATA: HEALTHY OPERATING MARGIN
137
•Murata’s operating margin has been traditionally high – around 20%, which Murata manages to
maintain, except for the post-Lehman Shock period.
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2000 2005 2010 2015 2020
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0
10
20
30
40
annualoperating/netmargin(%)
Annual margin Murata (%)
operating margin
net margin

KYOCERA =
KYOTO CERAMICS
SLOGAN:THE NEWVALUE FRONTIER
MOTTO:“RESPECTTHE DEVINE AND LOVE PEOPLE
138

KAZUO INAMORI
FOUNDER OF
KYOCERA
139
•born January 30, 1932
•1955 graduated from Kagoshima
University with B.Sc. in Applied
Chemistry
•April 1, 1959 founded Kyoto
Ceramics
•1984 founded DDI, today part of
KDDI
•1984 founded Inamori Foundation
which awards the Kyoto Prize
•2010 CEO of Japan Airlines, turns
around Japan Airlines after
bankruptcy

TDK (+ EPCOS)
“CONTRIBUTETO CULTURE AND
INDUSTRYTHROUGH CREATIVITY”
148

TDK abbreviation of original company name:Tokyo Denki Kagaku Kogiyou
Founded
founded December 7, 1935 asTokyo Denki Kagaku Kogiyo KK as ﬁrst
company to commercialize ferrite materials, invented in Japan
Founder
Kenzo Saito
(based on Ferrite, invented byYogoro Kato andTakeshiTakei)
Headquarters Tokyo
Consolidated sales YEN 815 Billion (US$ 10.3 Billion) (2011, ending March 31, 2012)
Major share holders
passive electronic components, acquired EPCOS (formerly the passive
component division of SIEMENS)

ACQUISITION OF EPCOS
150
•On July 31, 2008TDK and EPCOS signed an agreement, wherebyTDK launched an offer to buy all
outstanding shares of EPCOS, thus acquiring 100% of EPCOS.
•Value of the acquisition transaction was on the order ofYEN 200 Billion (approx. US$ 1.859 billion)
•EPCOS was created in 1999 from Siemens-Matsushita Components, which was a joint venture
between SIEMENS and Matsushita, created in 1989.
•The transaction was completed on October 1, 2009, and the companyTDK-EPC was created.
•TDK-EPC has approx. 36,000 employees globally, and global sales are approx. EURO 1.8 Billion (in
FY 2012).
•Products are mainly passive electronic components, including:
•capacitors
•ceramic components
•EMC ﬁlters
•inductors
•resistors
•RF modules
•surface acoustic wave components (ASW ﬁlters)
•surge arresters
•ferrites
•For more details: http://eu-japan.com/2008/07/tdk-epcos/

TDK MARGIN
152
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2000 2005 2010 2015 2020
-20
-10
0
10
20
annualoperatingandnetmargin(%)
Annual margin TDK (%)
operating margin
net margin
•TDK’s margins are steady and in the 10% range except for the September-11
and the Post-Lehman Shock crisis periods.

ALPS
“PERFECTINGTHE ART OF
ELECTRONICS”
153

NIDEC
MOTTO:ALL FOR DREAMS
“FOR EVERYTHINGTHAT SPINS AND MOVES”
“AIMINGTO BETHE WORLD’S NUMBER 1 MANUFACTURER OF
COMPREHENSIVE DRIVETECHNOLOGY”
157

LONGTERMVISION ANDTARGETS
164
•FY2020 targets:
•YEN 2 trillion sales (US$ 20 billion)
•15% operating income ratio/margin
•FY2025 targets:
•FY2030 targets:

PLANS
165
•Nidec Business School top open in FY2016
•Corporate University to teach “Nagamori-ism” to future
executives (Nagamori Shigenobu is the founder of Nidec)
•Nidec R&D Center in Japan, opened in June 2012
•Production Engineering Laboratory, to open in FY2016
•to realize optimum production engineering methods for
Industrie-4.0

NITTO DENKO
“ALWAYS ONE STEP AHEAD IN MAKING GOOD
THINGS HAPPEN WITH SHEETS AND FILMS”
166

ROHM
172

OTHER ELECTRICAL
COMPANIES
COVERED INTHIS REPORT
177

IMAGING AND DOCUMENT
MANAGEMENT COMPANIES
178

CANONVS RICOHVS FUJI-XEROX
179
•This section compares Japan’s top imaging and document management companies.These are:
•Canon
•RICOH
•Fuji-Xerox
•While the traditional photo-copying business is dropping, CANON has several business segments
based on imaging.
•Fuji-Xerox is the longest standing and successful joint-venture between an US and a Japanese
company.
•In this section we focus on comparing Canon, RICOH and XEROX.
•We will expand this section in future editions of this report. Please subscribe to be sure to receive
updates of this report.

CANON
180

RICOH
185

COMPARING CANON, RICOH
AND XEROX
189

NINTENDO
194
For a detailed report on Nintendo and Japan’s game sector see: http://www.eurotechnology.com/jgames/

OKI ELECTRIC INDUSTRIES
SLOGAN: OPEN UPYOUR DREAMS
202

CITIZEN
“MICRO HUMANTECH”
208

TOKYO ELECTRON ANDTHE MERGER WITH
APPLIED MATERIALS
HAS BEEN CANCELLED DUETO OBJECTION
BY REGULATORY AUTHORITIES
212

TOKYO ELECTRON
213

APPLIED MATERIALS
217

ACQUISITION OFTOKYO
ELECTRON BY APPLIED MATERIALS
- HAS BEEN CANCELLED
220

SUMMARY
226

SUMMARY:
JAPAN’S ELECTRICAL MANUFACTURERS
227
Japan’s “top-8” electrical companies (Hitachi, Panasonic, SONY, Sharp,Toshiba, Mitsubishi Electric, Fujitsu, NEC)
combined have about US$ 500 Billion in revenues (sales), of similar economic size as the Netherlands, and have an
important position in the global economy.
While these companies were dominating global markets in the 1980-1990s, during the last 15 years they have not
grown, and their combined profits over the last 15 years has been approximately zero.
While these companies still file very large numbers of patents, possess important technology, for a combination of
factors, they have not succeeded to achieve their potential. Recently, the financial position of SONY, Sharp and
Panasonic have deteriorated substantially, and Sharp management has announced that the survival of the company is
in danger.
 
Overall these companies present extraordinary opportunities for improvement of performance.
The second part of this report focuses on Japan’s top 7 electronic component makers (Murata, Kyocera,TDK,Alps
Electronics, Nidec, Nitto Denko, Rohm).The financial position (growth and profits) of these group of companies is
better positioned, they represent about 30%-40% of the global component market, which grows at 10% / year.The
global electronics components market is estimated at around US$ 140-170 billion in 2012 and growing at an annual
rate of around 10% to US$ 220 billion in 2017. However their margins are overall declining, indicating that change of
business model is necessary.
Japan’s electrical companies embrace “mono zukuri” (= making things, the art of making things) as a virtue.They
emphasize manufacturing perfection as a competitive advantage.

GLOSSARY
228

GLOSSARY: JAPANESE FINANCIALYEARS
229
Japanese ﬁnancial year Heisei (current Emperor) Period
FY2007 H19 平成１９年度 April 1, 2007 - March 31, 2008
FY2008 H20 平成２０年度 April 1, 2008 - March 31, 2009
FY2009 H21 平成２１年度 April 1, 2009 - March 31, 2010
FY2010 H22 平成２２年度 April 1, 2010 - March 31, 2011
FY2011 H23 平成２３年度 April 1, 2011 - March 31, 2012
FY2012 H24 平成２４年度 April 1, 2012 - March 31, 2013
FY2013 H25 平成２５年度 April 1, 2013 - March 31, 2014
FY2014 H26 平成２６年度 April 1, 2014 - March 31, 2015
FY2015 H27 平成２７年度 April 1, 2015 - March 31, 2016

EUROTECHNOLOGY JAPAN KK
230

FOUNDED: FEBRUARY 1997 INTOKYO
231
Services and products - focus areas are high-technology, telecommunications, software, middle-ware,
environmental technology and medical equipment:
- Market entry to Japan for European and US high-tech companies, turn-round, reshaping, planning
and building of distribution networks
- European business development and strategy for Japanese companies
- M&A (European and US companies acquiring Japanese companies, Japanese companies acquiring or
investing in Europe)
- Turn-round preparations and management of foreign business in Japan
- Market research and strategy
- Due diligence of high-tech companies, environmental due-diligence
- Advisory services for investment fund managers and investors in technology ﬁelds
- we publish a series of market reports for about 10 years, which are purchased world-wide,
distributed direct and via distribution partners: http://www.eurotechnology.com/store/

232
- Leading high-technology business development boutique inTokyo, working globally
- Founded in 1996/1997 - 14 years experience, relationships, cooperations and success record.
- CEO works with Japan’s high-tech / telecom sector since 1984 - 27 years experience, resources,
cooperations.
- Wide network of cooperations in Governments, Embassies, trading companies, distributors, ﬁnance,
VCs, traditional corporations, venture start-ups, industry associations
- Experience: market-entry, restructuring, M&A, acquisitions, due-diligence
Customers include:
- More than 100 investment fund managers
- Industrial customers:
- NTT-Communications, SIEMENS, DeutscheTelekom, Cubic, Unaxis (now: Oerlikon), CITI Group,
CLSA Asian Markets, Genscape, Google, IKEA, Isabellenhuette, Landis+Gyr, National
Instruments, Swisscom,TechnoCom,
- Government
- NewYork Police Department, European Union,TEKES (Technology Research funding
organization of the Government of Finland)
Deep Japanese technology market knowledge - we publish a series of market reports for about 10
years, which are purchased world-wide.You can purchase our reports via eSellerate: http://
store.eSellerate.net/s.aspx?s=STR0576176470 and from http://www.eurotechnology.com/store/

GERHARD FASOL
PROFILE: HTTP://WWW.FASOL.COM/PROFILE/
233
- Worked successfully with Japan’s high-tech sector since 1984 - 27 years. Came first to Japan in
1984 to help build NTT’s first international R&D cooperation on semiconductor lasers
- Entrepreneur inTokyo since 1996, Eurotechnology Japan KK worked with many large corporate
groups (e.g. SIEMENS, NTT, DeutscheTelekom,Asahi Glass...), more than 100 investment fund
managers
- Assoc. Professor of Electrical Engineering atTokyo University. Record of Fasol-Laboratory atTokyo
University: http://www.fasol.com/tokyo_university/
- Elite “Sakigake” (Pioneer) R&D project on Spin-Electronics of Japanese Government Science and
Technology Agency.This work was evaluated by US National Science Foundation and US
Department ofTrade: http://www.wtec.org/loyola/erato/ch7_5.htm
- Co-initiator of spin-electronics device research in Japan, one of the first to start work on spin-
electronics in Japan in 1991
- Tenured Faculty member at Cavendish Laboratory/University of Cambridge.
- Assoc. Professor of Electrical Engineering atTokyo University
- PhD in Solid-State Physics (Cambridge University,Trinity College, UK)
- Diplom-Physiker, Ruhr-University Bochum (Diplom-Thesis on Superconductivity)
- Publication list (Books, patents and publications, several publications are specifially concerning
electron-spin and spin-electronics): http://www.fasol.com/profile/publications.shtml
- Languages: English, German (native), French, Japanese, and some Swedish

GERHARD FASOL WITHTETSUZO MATSUMOTO, EXECVP OF
SOFTBANK MOBILE CORPORATION
234

25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING
FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S
235

25 JAPANESE LEADERS + 1 FOREIGNER (GERHARD FASOL) WORKING
FOR ONEYEAR ON CONCEPTSTO OVERCOME JAPAN’S
236

CONTACT AND MORE INFORMATION
237
Contact
•Gerhard Fasol PhD
•Eurotechnology Japan KK,Tokyo, Japan
•http://www.eurotechnology.com/
•Mobile +81-90-8594-6291
•fasol@eurotechnology.com
•gfasol@gmail.com
More information:
•reports:http://www.eurotechnology.com/store/
•twitter: http://twitter.com/gfasol/
•website: http://www.eurotechnology.com/
•personal site: http://fasol.com

Japan's electronics manufacturers: "mono zukuri"

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