The order book of Japan's top 6 electronic parts companies rose 8% from a year earlier to about 1.43 trillion yen in January to March 2018, compared with the same period a year earlier. This is after five quarters of only single-digit growth again. Reduced sales of high-end models from Apple in the U.S. and Asian smartphone makers had an impact on this. On the other hand, parts and components that support automotive technology, such as pure electric vehicles and driver assistance, are playing a supporting role and are becoming a new growth engine.

According to the statistics, the order amount (some companies are sales close to the order amount) of six companies, Murata Manufacturing, TDK, Kyocera, Nidec, Alps Electric, and Nitto Denko. The order value of electronic parts companies turned to growth in October~December 2016, shaking off the effects of the 2015 smartphone business downturn, and since then the order value has been growing at around 15% as smartphones continue to improve their functionality. Prior to October~December 2017, it had hit a record high for 2 consecutive quarters.

The current business slowdown is due to the low performance of high-featured smartphones. Since the beginning of 2018, Apple in the U.S. has reduced production of its highest-end model, the iPhone X, and told component manufacturers to adjust their sales plans downward. The effect of the promotional policy that allows Chinese manufacturers to easily purchase high-priced smartphones has also come to an end, and the growth of high-featured models has been sluggish.

Alps Electric's order intake was flat year-on-year due to the slowdown in demand for smartphones. Murata Manufacturing, which accounts for 40 to 50% of the global share in smartphone communication parts and other fields, saw its order book for electronic parts, excluding the acquisition of Sony's battery business, increase by about 10% in real terms. Nitto Denko decreased by about 10%, and components for displays were also affected by sluggish sales of the latest iPhone models and order volume adjustments concentrated at the end of the year.

The six companies' orders for the full year of fiscal 2017 (ending March 2018) amounted to about 5.94 trillion yen, a record high. Although growth slowed, orders in the automotive field, such as pure electric vehicles, played a supportive role. The pattern of a shift in the mainstay of electronic parts to the automotive sector to compensate for the deceleration in smartphone demand is becoming more pronounced.

Murata will increase the production capacity of its Shimane plant and invest up to 100 billion yen by the end of FY2019 to produce capacitors for pure electric vehicles, etc. TDK is also planning to increase the production capacity of automotive power supply parts by 20% at its plants in Japan and overseas.

The overall order volume of the six companies may remain at the same level as at present from April to June onward. Regarding future demand trends, the majority view in the industry is that “the focus will be on the summer and beyond, when orders for new smartphone products are in full swing. On the other hand, orders for the automotive field, which is promoting electrification, are likely to remain firm.

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