TOKYO -- Japanese smartphone makers are losing out to Asian rivals.
Sony was overtaken by Beijing's Xiaomi Technology, dubbed the Apple of China, in global market share in the January-March quarter. The only silver lining for Japan is that it supplies parts such as capacitors for handsets. How can Japanese parts makers protect their market share as Taiwanese makers close in? They must embed themselves in smartphone supply networks.
"The majority of the smartphone parts business is determined by the three places: Silicon Valley, San Diego and Taiwan," said a top executive of an electrics parts maker. Silicon Valley is home to Apple; Qualcomm is headquartered in San Diego; and Taiwan is where the world's two leading foundries are based. Other than Apple, most manufacturers are losing power to chipmakers because of a new way of developing phones, called reference design.
Through the new design process, chipmakers provide manufacturers with information for developing smartphones such as the most appropriate components and the best parts suppliers to work with. If developers design their smartphones using the parts listed, they can minimize the time they take troubleshooting, because they already know the pros and cons of the parts going into the handsets. Chinese smartphone makers are using reference design to shorten development periods and slash costs.
Being listed in a reference design boosts parts sales. It could help Japanese makers quickly achieve double-digit growth in shipments. For this reason, parts makers' sales efforts have shifted from smartphone manufacturers to chipmakers.
"We have finally made it," said Takehiro Kamigama, the president of TDK. "We will see concrete results in 2014 and after." Expectations are running high at the company because TDK electronic components in the second half of 2013 were included in the reference designs of major chipmakers, including MediaTek. As there had been only a few parts listed in the reference design previously, TDK stepped up sales operations by doubling the number of personnel in MediaTek's base -- Hsinchu, Taiwan -- and San Diego, home of Qualcomm.
A dramatic growth in demand for electronics parts can be expected because once they are listed in reference designs, there is a good chance that many smartphone makers will buy them. "Collaboration with chipmakers is of primary importance," said Kamigama. Accordingly, many smartphone parts makers are reinforcing sales operations in Taiwan.
Murata Manufacturing boosted sales by forming favorable relationships with Qualcomm and MediaTek. The chipmakers include its individual parts such as capacitors and also its wireless circuits and other module components in reference designs. The result: Murata has been inundated by orders from smartphone makers in South Korea and China. To further expand, Murata is beefing up its sales bases in North America and Taiwan.
Alps Electric, which makes camera parts for smartphones, is also putting more efforts into getting into reference designs. "We cannot expect a jump in sales without (winning over) Chinese smartphone makers," said Nobuhiko Komeya, a director of Alps Electric. "To gain a foothold in China, we are strengthening relationships with MediaTek and other chipmakers."
"It is not just MediaTek," said a Taiyo Yuden marketing official. "Marketing efforts for Spreadtrum Communications and other Chinese chipmakers are also vital." The Tokyo-based company recently doubled the number of sales staff it employs in China. It has won orders from MediaTek and Spreadtrum by stepping up sales operations for Taiwanese and Chinese chipmakers, especially for high-frequency parts such as filters. "The total number of orders we have received so far is so massive that we are carefully examining them to prevent excess production," said Eiji Watanuki, president of Taiyo Yuden.
Sharp, which has formed a business alliance with Qualcomm in the development of the next-generation smartphone displays, is also placing special emphasis on securing positions in reference designs. In addition to displays, it aims to increase the number of parts listed in the reference designs, including the control device, by deepening coordination with Qualcomm.
Now there are only several leading makers of chips for smartphones, the brain of the handset, including Qualcomm, MediaTek and Nvidia, a California-based company. To stay in the smartphone market, Japanese electronics parts makers will have to deepen ties with chipmakers.