December 29, 2016 1:00 pm JST
Interview

Smartphones aren't finished as growth driver, Murata chief says

Parts maker sees sales rising at 10%-plus over next three years

Workers operate machinery at a Murata Manufacturing factory in Fukui Prefecture, Japan.

OSAKA -- Smartphones will remain a source of growth for parts supplier Murata Manufacturing in 2017 and beyond as producers keep loading them with features and mobile internet speeds rise.

Even though phone sales lost steam in 2016, a recovery could very well be coming, President Tsuneo Murata recently told The Nikkei.

But "going forward, the growth is going to be of a subdued nature," the third-generation chief said, adding that he envisions a future for Murata as "a company with parts at its core that also provides finished goods as well as services."

Excerpts from the interview follow.

Q: What is the outlook for smartphone demand around the world?

A: Companies like Apple have the technological prowess to offer more new features. If the models that come out in 2017 are appealing, smartphones' popularity is sure to reignite. They are used to control all sorts of devices in the internet of things and are thus becoming a core element in that field. They will keep evolving in various ways. I don't get the sense at all that smartphones are finished.

Communications technology faster than the currently widespread 4G service will become available around the world over the next few years. Next will come 5G service [said to offer 100 times the speed of 4G]. At each step, the number of components going into smartphones will increase. Although the momentum is not as strong as in the past several years, we expect 10%-plus annual growth in sales at least over the next three years.

Q: Group sales and net profit are both forecast to drop for the first time in five years in the current year ending March 2017.

A: The yen's appreciation in the first half of the fiscal year took a toll. Missing out on orders for communications modules from big handset makers was also a big factor. We spread our human and financial resources too thinly across a broad range of operations, and as a result our [product] performance paled in competition in key areas. Management resources in design operations have been stretched.

Q: Murata is investing aggressively in new domestic production facilities and elsewhere. What is the growth strategy?

A: The underlying assumption that smartphones will drive earnings growth will not change. We will work to increase orders for modules. This will make it easier for us to manufacture module components in-house. In electronics parts for automobiles, we expect annual growth of 10% in drive-assist sensors and other components. 

We are also considering getting into medical equipment. I don't see our capital investment for medium- to long-term growth as excessive. Our strength has been that we were quicker than rivals to expand output capacity.

Q: Murata will acquire Sony's battery business in the spring.

A: The top priority is meeting the target of turning the operations profitable in two years. We aim for growth in storage batteries for residential applications and emergency power generators for buildings and will also consider getting into electric-vehicle batteries down the road.

Interviewed by Nikkei staff writer Yorihisa Ota

Murata Manufacturing Co. Ltd.

Japan

Market(Ticker): TKS(6981)
Sector:
Industry:
Electronic Technology
Electronic Components
Market cap(USD): 35,161.30M
Shares: 225.27M

Sony Corp.

Japan

Market(Ticker): TKS(6758)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 48,481.76M
Shares: 1,264.38M

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