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Record R&D outlays planned at 1 in 3 Japan companies

TOKYO -- Japanese corporations are aggressively developing new technologies to ensure competitiveness years down the road, with about one-third of major companies planning to spend record amounts on research and development this fiscal year, a Nikkei survey shows.

     Of the 328 businesses that responded to the survey, 111 intend to invest more than ever before.

     Total planned R&D outlays are up 4.7% to 11.79 trillion yen ($93.7 billion) for 268 companies that provided actual figures for last fiscal year, sharper growth than the 4% gain in last year's survey. The figure represents a sixth straight annual increase. The top three spenders are Toyota Motor, Honda Motor and Nissan Motor.

     Toyota plans to lift R&D spending 4.5% to 1.05 trillion yen, with a large chunk going toward development of environmentally friendly vehicles including fuel-cell cars. Other development products include sensors and artificial intelligence to support safe driving as well as nursing-care robots.

     Honda expects to spend 720 billion yen, up 8.7%, having relocated and expanded a U.S. research center in Silicon Valley this spring. The carmaker intends to develop cutting-edge automotive equipment with information technology companies. Nissan sees R&D outlays rising 4.7% to 530 billion yen.

     Automakers and autoparts manufacturers, which account for 30% of the overall R&D spending, see such expenses rising 6.1%. Even stronger growth of 8.5% is planned by the machinery, engineering and shipbuilding sector, where a majority of 19 companies are investing record amounts. Mitsubishi Heavy Industries intends to spend 90 billion yen, up 16.1%, on areas such as aircraft handled by a subsidiary as well as a next-generation gas turbine.

     IHI plans to lift R&D spending by 21.6% to 45 billion yen to bolster investment in aircraft components, a growth field. Costs will increase for the development of an engine for Boeing's next large jetliner, a project in which General Electric also participates.

     Kawasaki Heavy Industries, which is raising R&D expenses by 10.6% to 46 billion yen, is investing aggressively not just in aircraft components but also in new businesses including hydrogen power generation equipment and transport ships. It intends to maintain this high level of investment over the next five years.

     Materials and chemical manufacturers plan to increase their R&D budget by 5.1%, with 34 companies -- or 42% -- saying record amounts will be invested this fiscal year. Toray Industries aims to spend roughly 180 billion yen over three years through fiscal 2016 on fields such as energy conservation, alternative energy and environmental technologies.

     Ten drugmakers including Astellas Pharma and Sumitomo Dainippon Pharma plan record R&D spending this fiscal year, partly to develop new drugs as patents expire on some of their key products.

Joining with Southeast Asian schools

Japanese companies are creating research facilities and redeploying personnel to tap growth in Asia and emerging markets elsewhere. More businesses are partnering with prestigious universities in Southeast Asia and other regions.

     Of the survey respondents, 14.6% said they have increased cooperation with overseas schools while 31.7% plan to do so in the future. The machinery, engineering and shipbuilding sector was especially enthusiastic, as was the materials industry.

     One-quarter of the companies already have partnerships with Asian universities. China was the most popular country for such tie-ups, cited by 65.9% of these respondents, followed by 20.7% for Singapore and 17.1% for Thailand.

     Daikin Industries, Mitsubishi Heavy, Fujitsu and Rohm have partnerships with Tsinghua University, the distinguished science and engineering school of China. Dai Nippon Printing, Kajima and Mitsui Chemicals are among companies that collaborate with the National University of Singapore.

R&D centers outside Japan

Plans to build, increase or expand overseas R&D facilities were reported by 66 companies that responded, or 20.1% -- up from 12.8% that said they did so last fiscal year. This appears to be part of an effort to quickly develop products that match local tastes in Asia in elsewhere.

     The survey found that 32.1% of materials manufacturers plan to build or expand overseas R&D centers, compared with 28.1% for automakers and autoparts manufacturers and 24.3% in the machinery sector. The figures for the materials and machinery industries rose from 24% and 18.4%, respectively, in last year's survey, revealing a rush to expand abroad. The decline from 48.1% for makers of autos and autoparts likely signals that they already have substantial overseas R&D facilities.

     The U.S. is the top spot for these R&D centers, cited by 53% of the companies, followed by 48.5% for Southeast Asia and 40.9% for China. Of the companies that are increasing their researchers abroad, 48.5% said they are doing so in the U.S. and 47% in Southeast Asia. As Southeast Asia becomes more important as a consumer market, businesses are moving to develop products locally.

     Seventy-seven companies, or 23.5%, plan to hire foreign researchers, with machinery manufacturers at 37.8%, IT companies at 29.4% and material manufacturers at 28.4%.

     Many companies said they are focusing on open innovation -- an effort to tap the development capabilities of others -- with 9.5% reporting that they have established specialized departments. The food, pharmaceuticals and biotechnology sector was especially eager, with 18.4% creating open innovation departments, while 14.7% of IT businesses have done so.

     The survey was conducted on 513 key companies, with 63.9% providing valid responses.


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