Japanese Semiconductor Distributors Accelerate Overseas Expansion Amid Shrinking Domestic Market

According to a report by Nikkei Asia, Japanese semiconductor distributors such as Sun-Wa Technos, Kaga Electronics, and Ryoyo Electro are accelerating their expansion into overseas markets, hoping to compensate for the continuing decline in the domestic market by expanding into emerging countries.

Sun-Wa Technos, for example, plans to open an office in Bangalore, India next month to provide parts and assembly for industrial equipment. The company hopes to tap into the demand in India, initially coming from Japanese companies operating in India, and plans to develop relationships with local companies in the future. Sun-Wa Technos aims to increase its overseas sales ratio from 38% in the fiscal year ending March 2022 to between 60% and 70%.

Kaga Electronics, on the other hand, is expanding its electronic manufacturing services. Last year, the company invested approximately 1 billion yen (7.5 million US dollars) to build a semiconductor substrate factory in Penang, Malaysia. The company aims to double its current sales in Malaysia to 10 billion yen by 2027. It also plans to establish a factory in Turkey and start producing semiconductor substrates for air conditioners and power tools from June.

In addition, Ryoyo Electro, which handles electronic components for household appliances, is also looking overseas. Its overseas sales in the fiscal year ending January 2023 were 45 billion yen, 2.7 times higher than five years ago.

The urgency to expand overseas sales is due to Japan's decline as a semiconductor consumer. According to world semiconductor trade statistics, the Asia-Pacific region, including China, accounted for 58% of semiconductor sales in 2022, followed by the US at 25%, Europe at 9%, and Japan at 8%. Japan's market share was 23% in 2000, and this decline has led these Japanese semiconductor distributors to look beyond their borders for growth opportunities.