Japan Gains from China Smartphone Boom

Booming smartphone industry, especially in China helped Japanese companies to make profit last year and is adding more this year as a significant portion of those handsets made in China and elsewhere uses parts made in Japan.

Japanese companies like Murata Manufacturing Co. or TDK Corp are supplying parts range from displays and Wi-Fi modules to tiny, energy-storing ceramic capacitors to upstart Chinese phone makers like Xiaomi Inc., Lenovo Group Ltd. and Huawei Technologies Co.

"The parts sales are a rare bright spot in Japan’s gloomy electronics industry, as Japanese suppliers often provide a larger share of components to Chinese brands than to Apple or Samsung," analysts opine.

In the second quarter of this year, Xiaomi leapfrogged Apple and Samsung to become the best-selling smartphone provider in China.

Chinese companies are boosting purchases of Japanese parts as they push beyond the domestic market, in order to upgrade their phones. In some Chinese-branded phones, Japanese suppliers provide up to half of the parts by value.

By contrast, Japanese suppliers account for about one-third of the bill of materials for the latest iPhones, and less than that for Samsung phones.

The push to automate smartphone assembly plants in China, including those making phones for non-Chinese brands, is providing a further boost to Japanese suppliers.

Japanese parts suppliers have also benefited from the recent weakness of the Japanese yen, which reduces a price gap with competitors in South Korea and China.