TOKYO -- The launch of Apple's iPhone X has brought a boom for Japanese parts suppliers, six of which scored record order values on a quarterly basis in July-September, and business looks set to stay strong now that production of the high-end smartphone is getting on track.
Now that manufacturers have overcome some initial trouble mass-producing parts for the new features, orders for October-December look set to rise 10-20% year-on-year as well. Apple's adoption of new screen technology for the X has left some suppliers out in the cold, however.
A key Murata Manufacturing plant in Japan's Fukui Prefecture churns out ultra-fine multilayer ceramic capacitors no wider than a hair. The tiny parts filter electrical noise from circuits, and one smartphone can use as many as 700 -- a number growing as the handhelds get more sophisticated. Murata commands a roughly 40% share of the capacitor market.
Murata's order balance is at record levels on a quarterly basis. Its equipment investment has risen from an annualized 170 billion yen ($1.5 billion) to 260 billion yen, and the company is hurrying to crank up output at all its domestic plants.
iPhones in general are getting thinner with each new model, and the X comes with facial recognition and other new features, as well as new camera capabilities. And though as some note, the phones are using a lower proportion of Japanese parts, those parts remain the ones supporting technological leaps forward. Murata has developed a thin multilayered resin it calls MetroCirc, for instance, which can be folded to free space for building in new features.
But there have been hiccups this year in getting Apple's new iPhone models to mass production. Murata, for instance, took on more orders than expected when other manufacturers could not meet the volumes Apple requested. The Kyoto-based manufacturer stumbled in efforts to rationalize so it could mass-produce at low cost, and ended up downgrading its full-year earnings forecast as costs grew by 20 billion yen.
But having reworked its mass-production setup, Murata is now "closing in on the requested quantities," says President Tsuneo Murata. The executive is bullish despite past troubles, predicting that "the parts market will remain strong." Murata has purchased a former Sony camera component plant in Ishikawa Prefecture and aims to build a new factory for MetroCirc substrates as well.
Off and running
Other manufacturers have also run into trouble mass-producing parts related to the iPhone X's OLED screens and facial-recognition technology, delaying output of the phone, but production seems to be improving at last. Taiwanese manufacturers -- including Hon Hai Precision Industry, better known as Foxconn Technology Group, the X's sole assembler -- have also worked out a stable production system, and output is apparently on a recovery track.
Murata's fellow Kyoto manufacturer Kyocera is also enjoying brisk demand for goods including mainstay ceramic components, and its orders in the second fiscal half look set to grow by double digits from that period the year before. "Parts demand is strong for October-December and beyond as well," says President Hideo Tanimoto.
Alps Electric sees order values for the October-December quarter growing by about 20% year-on-year on demand for smartphone parts. Actuators, used in controlling movement of smartphone cameras, are expected to perform particularly well.
Nitto Denko supplies films used in the iPhone X's organic light-emitting diode screens and expects orders to stay strong. Taiyo Yuden plans to invest about 10 billion yen to boost production of capacitors at a site in Niigata Prefecture.
Love lost for LCDs
As for displays themselves, however, Japan-based makers of LCD panels such as Japan Display and Sharp -- acquired last year by Foxconn -- are missing the wave. Apple is relying solely on South Korea's Samsung Electronics to supply OLED screens for the X, the first iPhone to use that technology.
Apple stuck to LCD screens for the iPhone 8 and 8 Plus, the other new models it released this year. But the X appears to account for around 60% of its iPhone shipment volumes, leaving Japan Display and Sharp with a drop in sales compared to the previous year's models.
These parts manufacturers all need to stay on their feet to provide new, technologically advanced products before others, and the hurdles involved grow higher each year.