TOKYO -- China's Huawei Technologies will soon start turning out network equipment at its first plant in Japan, using this country's technical expertise to appeal to buyers in established markets and setting an example for other up-and-coming tech companies.
The smartphone and communication equipment maker's inaugural Japanese factory will repurpose a former DMG Mori plant in Funabashi, Chiba Prefecture. New equipment could be installed and production started as soon as this year. Huawei's initial investment in the project is thought to be around 5 billion yen ($44.5 million). Additional spending is under consideration.
Huawei is widely known as the world's No. 3 smartphone maker by sales. But other devices like routers and network infrastructure account for the bulk of its revenues, which came to 521.5 billion yuan ($76.7 billion) in 2016. Sales to companies such as Japan's SoftBank Group are on the rise as telecommunications heavyweights scramble to introduce or expand high-speed network coverage. Establishing a manufacturing foothold in Japan will enhance Huawei's ability to supply the Japanese market.
Chinese companies began streaming in to Japan in the late 2000s, in large part by acquiring Japanese counterparts whose earnings had faltered. China's Suning Commerce Group, a prominent electronics retail chain, bought Japanese retailer Laox in 2009. Sports equipment maker Honma Golf and textile maker Renown have also passed into Chinese hands.
Lately, the trend has been to bring research and development functions to this country as well. China's Great Wall Motor is researching such technologies as electric cars and automated driving at a Japanese facility completed in 2016. Telecom equipment maker ZTE is at work at a Tokyo facility on the "internet of things," wirelessly linking everyday objects.
Huawei's new production center, the first full-scale factory a Chinese company has built in Japan, will complement its own Japanese research facility. As labor costs in China rise, production in Japan is becoming less expensive, in relative terms, than it once was. Huawei plans to employ a large contingent of production control experts at the plant, helping the company combine the best of Japanese manufacturing and Chinese-style low-cost, high-volume production to ensure both quality and cost-competitiveness. The hope is that this blend will let Huawei rope in more orders from buyers in First World nations, including Japan itself.
Huawei's compatriots could soon follow the manufacturer's example. China's slowing economic growth is pushing businesses to tap foreign markets, which has led many companies to shift focus to higher-added-value products than those that typically do well at home. Japan could be an attractive choice for many businesses' initial forays into overseas manufacturing, given its geographic proximity, high-quality infrastructure and skilled labor force.
But the government in Tokyo has work to do if Japan is to become a true production and export hub for promising companies in emerging nations. This includes strengthening free-trade arrangements, particularly with the U.S. and European nations, so that goods made in Japan can be exported without encountering steep tariffs. Chinese companies' forays also are rising in South Korea, which has trade agreements with both the U.S. and the European Union and signed a deal with China in 2015.
Courting manufacturing operations could help boost Japan's economic growth -- the mirror image of what Japanese manufacturers did for China in years past. But some caution is required: The unchecked sale of Japanese businesses to Chinese companies could bring leaks of important technology. As China Inc. heads to Japan, transparency is key.