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5G networks

Japan's electronics sector opens wallet to guard turf in 5G parts

Industry faces another test after losing out in finished devices

Technicians install 5G antennas in Switzerland. Japanese companies control a large market share in the components that make these networks tick.   © Reuters

OSAKA -- Japanese companies are pouring hundreds of millions of dollars into producing components for 5G telecommunications equipment, hoping to maintain their dominance after falling behind Chinese and South Korean competitors in finished mobile bases and smartphones.

Fifth-generation networks, with speeds 100 times those of existing 4G networks, launched in the U.S. and South Korea this year. The global market for 5G gadgets, such as surveillance cameras and drones, could top the equivalent of $241 billion in 2023, according to the Fuji Chimera Research Institute.

To capture growing demand, Sumitomo Electric Industries will invest 20 billion yen ($184 million) by 2020 to double capacity for antenna parts at Yamanashi Prefecture production facilities. Made of gallium nitride instead of the more typical silicon, the products will require less electricity and allow for smaller, cheaper base stations. Clients include Ericsson and Huawei Technologies.

Rohm has developed new power semiconductors used to switch 5G bases on and off. They are half the size of existing models and can reduce electricity losses to 3% from 7%. Sample shipments will begin as early as the autumn of 2020.

Murata Manufacturing plans to invest more than 10 billion yen over two to three years to boost capacity for 5G smartphone parts. It has a roughly 50% share in LC filters, which pick out signals from certain frequencies.

"The 5G smartphone market will grow 20% to 30% a year for the next two to three years," Senior Executive Vice President Norio Nakajima said.

Others are looking at acquisitions. Kyocera plans by December to take a 51% stake in Ube Electronics, which has designed ceramic filters for use in 5G bases. Mass production as early as 2020 is the goal.

Meanwhile, Advantest is betting on the 5G boom to lift demand for its chip-testing equipment. April-June orders for its system-on-a-chip testers exceeded initial projections by roughly 15 billion yen.

"As products become more advanced, demand for testing equipment grows," an Advantest executive said.

But it is not unusual for front-runners to fall behind when an industry undergoes significant change. Huawei is developing its own 5G chips and mobile operating system amid the U.S. campaign to blacklist the company. Domestically sourced components could provide an alternative to Japanese parts.

Japanese companies fell behind the pack in smartphones and other finished products because they failed to accurately predict where the market was headed. 5G poses the next test of their relevance.

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