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Japan's Parts Makers Profit from Electric Vehicles Over Smartphones

Updated: Jan 4

Japan's major electronic parts manufacturers anticipate profit growth in the new fiscal year, driven by the rising demand for electric vehicle components.

Electric Vehicle
Credits: Reuters

Global smartphone sales reaching a plateau have prompted Japan's leading electronic parts makers to shift their focus towards components for electric vehicles (EVs), predicting a surge in profits for the upcoming fiscal year. The combined profits of the top eight players are projected to increase, marking the first growth in two years. With a forecasted 8% rise in consolidated net profit, totaling 829 billion yen ($6 billion) by the end of March 2024, the industry gears up for a profitable period.

Kyocera President Hideo Tanimoto highlighted the contrast between sluggish smartphone component sales and the relatively strong automotive sector during a recent news conference. The company foresees a notable 13% gain in net profit. Likewise, Nidec, TDK, Nitto Denko and Alps Alpine also expect to recover from the previous fiscal year's slump, which was impacted by the fading demand for phones and personal computers due to the pandemic.

TDK anticipates a remarkable 29% increase in net profit, positioning it at a record high. The company foresees robust sales of electronic components such as multilayer ceramic capacitors and magnetic sensors. President Noboru Saito attributes this growth to the expanding market for electrified vehicles, emphasizing the rise of revenue sources beyond rechargeable batteries.

Nidec, a leading motor maker, is optimistic about achieving record profits, fueled by the profitability of its E-Axle traction motor system for EVs. Automotive-sector sales at five of the companies witnessed a 22% surge, totaling 1.63 trillion yen in the fiscal year ended March 2023, according to disclosures and estimates from Nikkei. The sector's contribution to the companies' overall sales also increased by 3 percentage points to reach 24%.

The International Energy Agency reports a 50% growth in global sales of EVs and plug-in hybrid vehicles, surpassing 10 million units in 2022. The agency predicts a further rise to 14 million units in 2023. China emerges as the key driving force, accounting for approximately 60% of the 2022 total. In response to incentives from the Biden administration, EV-related capital spending in the United States is also witnessing a notable increase.

However, not all electronic parts manufacturers share the same success story. Apple suppliers Murata Manufacturing, Rohm and Taiyo Yuden forecast a decline in profits due to the global slump in smartphone demand. Murata expects a drop of around 30% in net profit, while Taiyo Yuden, holding the world's third-largest market share in capacitors, anticipates a significant 66% decrease.

U.S. research firm International Data Corp. projects a 1% decline in global smartphone shipments, amounting to 1.19 billion units in 2023, with a full market recovery not expected until 2024. Lengthened replacement cycles for high-end models, including iPhones, partially driven by high prices, contribute to this trend. Murata Chairman Tsuneo Murata believes it will take "several years" to reach the previous market volume of 1.3 billion units.

After experiencing record profits in the year ended March 2022 due to pandemic-induced stay-at-home demands, the combined profit of the eight electronics companies declined by 21% to 765.1 billion yen in the year ended March 2023, indicating the short-lived nature of their gains.

  • Japan's major electronic parts makers shift focus to electric vehicle components as global smartphone sales plateau.

  • Combined profits of top eight players forecasted to rise after a two-year decline.

  • Automotive sector shows strong sales, contributing to profit growth.

  • Companies like TDK and Nidec expect record-high net profits due to demand for electronic components in EVs.

  • China leads in EV sales, while the US sees increased EV-related capital spending.

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