(Original Title: Chinese 5G sparks gold rush for Japan ’s masters of materials)

Netease Technology News on December 12, according to foreign media reports, with Huawei and the Chinese government betting heavily on 5G, some unknown material suppliers in Japan will benefit from it.

Picture: According to Goldman Sachs, China's investment in 5G is expected to exceed $ 150 billion by 2025.

One day in late November, a dozen Japanese businessmen in black suits gathered in Tokyo to hear Huawei executives tell a new and lucrative industry: 5G. Huawei Chairman Liang Hua told them how fast China is deploying a lightning-fast 5G network (far before the plan), and how big the business opportunities involved are.

In front of executives and researchers from companies and universities such as Fujifilm, Sony, and Mitsubishi Heavy Industries, Liang Hua threw a series of eye-catching numbers and promised "to cooperate with Japan to further develop our supply chain."

China will surpass the United States in the 5G market and will also benefit a lot from Japan. In turn, Japanese suppliers will seize an unexpected opportunity in the Sino-US competition.

Huawei has steadily shifted its procurement work elsewhere, and Japan has benefited from it. Liang Hua said that from January to September this year, Huawei invested a total of 780 billion yen (about 7.2 billion US dollars) in Japan-60 billion yen more than last year-and hinted that there will be more investment in the future.

As far as Japanese suppliers are concerned, they are ramping up production in preparation for the upcoming 5G boom. Many of them are unknown companies, but the materials and components they provide are indispensable for big brands such as Huawei.

Tokuyama is one of them. The company was founded in 1918 and controls 75% of the global high-purity aluminum nitride market. Aluminum nitride is an important component of a heat-dissipating material used to prevent semiconductors from overheating. It is expanding its main plant in southern Japan with a view to increasing production capacity by 40% next April.

Tokuyama general manager Yoshiyuki Yamamoto is expecting a surge in market demand, especially from data centers. "5G will increase data consumption," he said. "Therefore, the industry's demand for semiconductors and thermal materials will increase."

In fact, he believes that 5G is just the beginning of a larger order boom. After all, everything from cars to air conditioners will be equipped with chips that support networking. According to the Semiconductor Industry Association, global semiconductor sales in the third quarter of 2019 reached $ 106.7 billion, an increase of 8.2% from the previous quarter.

Furuya Metal is another niche supplier in Japan. Ninety percent of the world's iridium compounds are produced by the company, and phosphorescent materials for OLED (organic light-emitting diode) displays produced by BOE of China, Samsung Electronics of Korea and LG Electronics are indispensable for such materials.

Major smartphone manufacturers have already adopted high-resolution OLED panels. According to Kazuo Oishi, director of Furiya Metal, this screen will become more popular thanks to ultra-fast 5G video streaming. "The company's sales have grown significantly over the past year," he said.

The company did not provide detailed data, but said that sales of chemical products, including iridium compounds, had doubled compared to fiscal 2017.

Masami Sawato, a senior analyst at Japanese brokerage SBI, said that while serving domestic once-bright domestic chip, display and finished consumer electronics manufacturers, Japanese material suppliers have continuously improved their professional skills. "Today, end products are being replaced by products from China and South Korea, but key materials are still in Japan."

The analyst added that diplomatic disputes between Japan and South Korea this year have further highlighted "the dominance of Japanese suppliers." Due to restrictions on imported materials from Japan, South Korea can only respond hastily, claiming to invest nearly $ 850 million in order to independently develop and produce key semiconductor materials in the country.

The Japanese government's export restrictions on photoresist, hydrogen fluoride, and fluorinated polyamide have hurt some domestic companies, but Yamamoto and others at Tokuyama said that it has had little impact on their business and that the turmoil has Somewhat relieved.

Taiyo Yuden supplies multilayer ceramic capacitors (left), Tokuyama supplies aluminum nitride

Japanese component makers are also preparing to benefit from Chinese investment in 5G.

In a recent interview with Nikkei Asian Review, Tsuneo Murata, president of Murata Manufacturing Co., said that 5G base station products are "more demand than expected". The company is the world's largest supplier of multilayer ceramic capacitors (hereafter referred to as "MLCCs"). This material is a tiny component that stores and releases electricity to ensure a smooth flow of electricity in telecommunications equipment.

Taiyo Yuden, the third-largest MLCC maker after Murata and Samsung, has invested 10 billion yen to increase production capacity. In March of this year, the company opened a third MLCC plant and is currently constructing another plant, which will start production next spring.

"In the past few years, we have increased production capacity at a rate of 10% every year." Said Mike Tanahashi, technical marketing manager at Sunshine, "but we remain concerned that as market demand is expected to increase significantly, we may not be able to supply Enough MLCC. "

According to the company, the number of capacitors used in smartphones has almost doubled in the past eight years. Samsung ’s first 5G phone, the Galaxy S10 5G and other high-end phones, have about 1,300 capacitors, 30% more than 4G phones.

Mike Tanahashi pointed out, "With the promotion of 5G, the demand for small capacitors that can store more power is increasing. Only a few suppliers can provide such high-performance components."

All indications are that China will need a lot of those parts, and it will soon.

Although South Korea and the United States were the first to open 5G networks, their coverage is limited, and China is quickly catching up or even surpassing them. In June this year, the Chinese government issued a 5G license, a few months ahead of schedule, allowing the three major mobile operators China Mobile, China Unicom and China Telecom to launch services in October.

The three companies acquired 9 million 5G users in the first month. According to GSMA, a London-based industry organization, China is expected to have 650 million 5G users by 2025, accounting for 40% of the global total.

Of course, this will require large-scale investments.

China Mobile is expected to provide a 200 million yuan subsidy for 5G mobile phones to encourage users to upgrade their phones. The company also plans to set up a 5G fund worth more than 20 billion yuan to promote the development of the industry.

Goldman Sachs estimates that by 2025, China's investment in 5G will exceed $ 150 billion.

Huawei's Liang Hua believes that this technology will be widely popularized early. He told Japanese listeners that 5G will penetrate the market at twice the speed of 4G and will gain a foothold in 3 years instead of 6 years.

Another lesser-known Japanese company, Anritsu, has also paid off. The company's electronic measuring instruments are used to test whether 5G equipment is functioning properly. For companies such as Huawei and Qualcomm, this type of product is an essential tool.

In the first half of this year, Anritsu's operating profit surged 90% to 6.6 billion yen due to surging Chinese demand.

"China's move shows the United States its determination to advance 5G." Anritsu CEO Hirokazu Hamada told the Nikkei Asian Review. "For China, 5G is a national project, and they cannot lose in this technologically dominant competition," he said.

IHS Markit senior analyst Mitsue Oba also considers 5G to be an important "national project" for the Chinese government, but warns that "a major challenge facing China is whether high-priced 5G equipment can become the mainstream of the market."

Chinese telecom operators are trying to offset equipment costs with subsidies and affordable data packages-currently the cheapest package is 128 yuan per month.

Anri Hirokazu Hamada also believes that the Chinese government is determined to gain an advantage in the 5G field at all costs. (Lebon)

Source: Netease Technology Report, translated by Google Translate

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