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Japan-Update

Kyocera plans nearly $1bn in spending as parts outlook brightens

Biggest investment buildup in almost 20 years for the Japan-based Apple supplier

  © Reuters

OSAKA -- Japanese electronics maker Kyocera will raise capital spending to more than 100 billion yen ($935 million) in the year starting April 1, much of which will go toward increasing domestic output of chip-related components used in smartphones and cars.

The increase of more than a fifth over the current fiscal year's outlays would bring the Kyoto-based manufacturer close to an investment record set in fiscal 2000 amid the dot-com bubble.

Kyocera supplies parts to device makers including Apple. Though demand for smartphone parts has slowed, the company sees the arrival of 5G wireless networks helping usher in a resurgence.

The manufacturer aims to raise output by 25% for ceramic packages -- protective casings for semiconductors, CMOS camera image sensors and other critical electronic parts -- at its factory in Kagoshima Prefecture in southern Japan.

Thinner than plastics, these coverings help make devices like smartphones slimmer. Kyocera will spend about 10 billion yen to build a new, six-story production facility and install equipment for layering ceramic membranes roughly 0.2mm thick. Construction starts in April, with operations expected to begin in August 2019.

Kyocera has kept capital spending around 50 billion yen to 80 billion yen for the past five years. Now, it sees compelling reasons to ramp up investment.

While Apple's iPhone X heads for production cuts, the prospect of larger screens and improved functions in new models due out in 2018 or 2019 means they will likely be more densely packed with components. On top of demand stemming from the rollout of faster 5G networks starting next year, automakers are using more electronic parts per vehicle as well.

The company also will invest more in factories that supply parts for making semiconductors, sensors and communications equipment -- all of which are crucial to artificial intelligence and the web of connected devices known as the "internet of things." This fall, Kyocera aims to double capacity for ceramic parts used in chipmaking equipment.

Fellow Apple supplier Murata Manufacturing increased capital spending by 90 billion yen in fiscal 2017 as the company bought a former Sony factory in Japan and began making advanced circuit boards. Alps Electric, another Japanese peer, plans to begin mass production of phone and automotive components at a new factory wing in northern Japan in fiscal 2018.

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