[Overview]

In the telecom market in the third quarter (October–December) of FY2024, higher unit prices, stemming from the continued depreciation of the yen and the rising cost of materials, continued to impact the market as observed in the first half of the year. However, demand for high-speed, large-capacity data traffic continued to rise, leading to a recovery trend in domestic production, particularly in digital transmission equipment, fixed-line communications equipment and network access equipment. Exports were positive for the first time in six quarters, supported by certain overseas carriers expanding their networks. Imports were increased by increased shipments of smartphones and data telecom equipment produced by foreign manufacturers.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 1,359.9 billion yen in the October through December period, a year-on-year increase of 8.1%. The rise was driven by the growth of domestic production of digital transmission equipment and increased imports of smartphones and data telecom equipment.

(2) Domestic Production Trends

Domestic production totaled 93.2 billion yen in October through December, a year-on-year decrease of 2.4%. Although production of digital transmission equipment and fixed-line communications equipment grew, supported by steady demand related to disaster prevention-related applications, other equipment categories remained weak, resulting in an overall decline in domestic production value.

(3) Export Trends

Actual orders received and shipped in the October through December period was 88.5 billion yen, up 2.1% year-on-year. Data telecom equipment, including digital transmission equipment, performed well and contributed to the increase of export value.

(4) Import Trends

In the October through December period, total imports amounted to 1,355.1 billion yen, a 6.9% increase year on year. Domestic demand for smartphones remained strong this quarter, supported not only by the launch of new models from major overseas manufacturers in the fall, but also by a last-minute surge in purchases ahead of the revisions to the Ministry of Internal Affairs and Communications’ guidelines on smartphone discounts. Data telecom equipment also grew, driven by the expansion of networks and increased investment in response to rising demand for data centers.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Orders received and shipped came to 327.6 billion yen, up 20.4% year on year. Of which the total value of domestic shipments totaled 254.7 billion yen, an increase of 16.2% over the same quarter of the previous year and exports were 72.9 billion yen, an increase of 37.7% over the same quarter of the previous year.

While mobile terminal equipment and wireline network equipment declined, wireline terminal equipment and wireless network equipment increased, resulting in the overall growth of domestic shipments. Notably, demand for fixed-line communications equipment, under wireless network equipment, generated by government agencies rose sharply, supported by disaster prevention-related budgets which have been secured. Exports rose significantly, led by a strong performance in facsimile machines and digital transmission equipment.

I. Outline

The Japanese economy in FY2023 showed signs of recovery from three years of the COVID-19 pandemic (hereafter referred to as COVID-19). In the telecommunications market, the widespread use of cloud services and web conferencing led to the upgrading of large-capacity/high-speed communication networks, expansion of or construction of new data centers translating into demand for Internet equipment. However, the weaker yen and rising parts and component costs pushed up the price of mobile handsets (with public phone line), and combined with longer replacement cycles or reluctance to purchase new handsets, kept growth figures flat. Weak appetites for capital investment among telecom carriers was evident from infrastructure equipment figures and the re-shaping of voice communications within the backdrop of changes in workstyles, pushed down demand for office-use equipment as well. In total, the total demand for telecommunication equipment for FY2023 was approximately 3.835 trillion yen (-6.8% year-over-year growth from the 4.114 trillion yen in FY2022).

Consumer spending headed towards gradual recovery in Japan, with the rise in actual wages and capital expenditure is also expected to grow in FY2024. The rise in the cost of parts and components is pushing up the unit price of equipment, while remote work and video streaming services are resulting in greater demand for high-speed, large capacity data traffic. Although several equipment categories are impacted by some overseas telecom carriers holding back on investments, the end to the shortage of semi-conductors has led to the projection of overall growth for exports. Total demand for telecom equipment in FY2024 is forecast at approximately 3.915 trillion yen (+2.1% year-over-year growth).

Changes impacting the ICT industry in Japan include diminishing global competitiveness, concerns over economic security and geo-political risks in the supply chain. Within this backdrop, Japanese brands manufacturing and selling telecommunication equipment lost market share to foreign brands with no end in sight to the shrinking of sales and profits. The imminent challenge will be how to embed Japanese technologies into the social fabric to tackle Japan’s social problems, such as the aging society, collaborate with numerous stakeholders – including government agencies and telecom carriers, and provide solutions applicable on a global scale. CIAJ will play its part in bringing together the strength of Japanese innovation to realize a home-grown world-leading Japanese ICT industry that is not just an extension of existing network technologies, but a blending of virtualization, ultra high-speeds, AI/IoT and other state-of-the-art technologies. The total telecom equipment market value is expected grow to approximately 4.236 trillion yen in FY2029, or an increase of 10.5% over the FY2023 figure.

II. 2024 Forecast

The total telecommunication equipment market figure for FY2024 is forecast at approximately 3.915 trillion yen (+2.1% over FY2023), with the domestic market accounting for about 3.653 trillion yen (+1.7% over FY2023), and exports accounting for 261.1 billion yen (+7.9% over FY2023).

Major Equipment Categories Forecast to Grow over FY2023 (In order of yen value growth)

(1) Consumer equipment total: 2.502 trillion yen (+1.9% over FY2023)

• Despite a decrease in the shipment of handsets due to a weaker yen and rising price of components leading to higher price tags that will cause consumers to hold back on new purchases and prolong replacement cycles, the domestic market value is expected to be higher.

(2) Enterprise equipment total: 424.8 billion yen (+0.1% over FY2023)

• Replacements are central to demand for key telephones, PBXs and office-use cordless phones and investments are shifting towards new work and communication styles. The close to complete elimination of supply restrictions is a positive factor, but the gradual restructuring of core corporate communications infrastructure contributes to the slight drop in the value of domestic demand.
• Changing work styles and the promotion of the switch to digital among private sector and government offices are expected to decrease demand for facsimiles (including multi-functioning facsimiles). Overseas demand for multi-functioning machines takes up a large share of facsimile demand value and like the situation in Japan, changes in work styles abroad is expected to have a negative impact. However, we predict a rebound from the drop in the previous fiscal year.

(3) Infrastructure equipment total: 540.7 billion yen (+9.0% over FY2023)

• Domestic demand for digital transmission equipment and base stations is forecast to remain flat after capital investment, mainly in 5G, by telecom carriers reached a peak in FY2022. With recovery from the semi-conductor shortage, demand for terrestrial fixed communication equipment for disaster-related emergency systems in the public sector is forecast to increase. Satellite fixed communication equipment is also expected to show positive growth.
• Exports are expected to rise as the recovery from the semi-conductor shortage makes it easier to procure parts and components for terrestrial fixed communication equipment and base station investments by overseas telecom carriers increase.

(4) Internet equipment total: 326.5 billion yen (+0.2% over FY2023)

• The investment cycle for higher speed networks during and following COVID-19 has subsided, leading to a forecast for lower demand for optical access equipment. Capital spending in routers is expected to rise to accommodate growing data traffic as telecom carriers expand cloud and other data services. Changes in work styles and the promotion of DX among private sector and government offices, as well as higher speed networks and high added value products for SOHOs are also forecast to have a positive impact. Demand for LAN switches will also grow as investments are made in network configuration changes to accommodate traffic growth and more devices connecting to the network. These trends will cumulatively result in growth in value of demand for this category.

(5) Equipment/parts categories not included above: 106.5 billion yen (-11.2% over FY2023)

III. Midterm Projection

The FY2029 total figure is projected at approximately 4.236 trillion yen (+10.5% growth over FY2023), with the domestic market accounting for about 3.944 trillion yen (+9.8% growth over FY2023) and exports accounting for 292.6 billion yen (+21.0% growth over FY2023).

Major Equipment Categories Forecast to Grow over FY2023 (In order of yen value growth)

(1) Consumer equipment total 2.752 trillion yen (+12.1% over FY2023)

• The domestic demand for mobile handsets is forecast to show flat growth as replacement of 3G terminals will be mostly completed in FY2024. From FY2026 onwards, higher demand and steady growth for 5G handsets is forecast, as services utilizing 5G SA (Stand Alone) format allows simultaneous access by numerous devices at low latency and 5G unique services make their way onto the market.
• The global mobile phone market (includes smartphones) in 2023 shrank with worsening uncertainty worldwide over geo-political circumstances combined with inflation, stunting consumption. The Chinese market is showing signs of recovery in the latter half of 2024, and the global economy is expected to improve from 2025 onwards, accounting for the projection for demand growth. With the majority of future smartphones expected to become 5G compatible, the 5G market will expand, while the non-5G smartphone market is expected to shrink.

  

(2) Enterprise equipment total: 369.7 billion yen (-12.8% over FY2023)

• Demand for key telephones, PBXs and office-use cordless phones will be affected by the restructuring of voice communication platforms at offices in connection with work style transformation and full adoption of cloud services, resulting in a continuous decline.
• The domestic market for office-use facsimiles (including multi-functioning facsimiles) will continue to decline with changes in work styles and the shift to digital at both private and public sector offices. Exports are also forecast to decrease for the same reasons as the domestic market.

(3) Infrastructure equipment total: 633.4 billion yen (+27.7% over FY2023)

• Among infrastructure equipment, demand for digital transmission equipment and base station equipment is expected to show gradual growth, as networks continue to be enhanced to accommodate the surge in traffic from 5G, local 5G, IoT services, and services incorporating generative AI. Demand for terrestrial fixed communication equipment is expected to grow from use in 5G radio backhaul and fronthaul and satellite fixed communication equipment demand is projected to increase from use in the public sector.
• Exports are expected to continue its growth with surging traffic and the building of new data centers.

(4) Internet equipment total: 338.9 billion yen (+4.0% over FY2023)

• Among Internet equipment, the market for routers will continue to grow to address traffic growth, replacement for more energy-efficient models and capital investments to strengthen security features. Growth is also projected for LAN switches with the surge in devices connected to the network as IoT/M2M evolves and services taking advantage of such advances emerge and full-scale 5G becomes more widely available. Demand for optical access equipment will be spurred by growing demand for large-volume contents and the pursuing use of high-speed services, as well as the need for offloading mobile data.

(5) Equipment/parts categories not included above: 127.0 billion yen (+5.8% over FY2023)

IV. Market Trends in New Businesses

(1) Background to the focus on new equipment and services

• In the past, the focus was on trends in telecom equipment used for providing fixed/mobile phone, ISDN, private leased circuit, and internet services. Telecommunication services, which used to be dedicated to providing a single type of service, have been impacted by technological innovations in ICT and the advancement of digital transformation (DX), leading to the combination of multiple services and solutions that are high-speed, large capacity, high value-added (low latency, multiple simultaneous connectivity, low power consumption, low cost, etc.) with the data processing power of AI and the storage capacity of the cloud. The base technologies that made this transformation possible relied on legacy communication technologies, but in recent years, virtual technologies are used in place of telecommunication equipment, with software running on general-purpose equipment, providing various combinations of features and technologies.

[Overview]

In the telecom market during the first half of FY2024, unit prices of equipment rose and the demand for high-speed, large-capacity data traffic for telework and video distribution services increased due to the weaker yen and the soaring prices of parts and materials. Meanwhile, domestic production declined significantly due to continued weak capital expenditures by carriers as well as strong imports. Exports of certain items decreased mainly due to reduced investment by overseas carriers. However, the value of the domestic market increased for the second consecutive half-year period, reflecting a significant rise in imports of smartphones from overseas manufacturers.

(1) Domestic Market Trends

The value of the domestic market (value of domestic production – value of exports + value of imports; excluding parts) amounted to 1,759.8 billion yen, a year-on-year increase of 18.7%. Domestic production of almost all types of equipment decreased. However, the value of the domestic market increased due to a rise in imports of smartphones and data telecom equipment.

(2) Domestic Production Trends

Domestic production totaled 149.9 billion yen, a year-on-year decrease of 15.6%. Investment in communications infrastructure saw sluggish growth. Production of terminal equipment and network equipment declined significantly. Consequently, domestic production decreased for the third consecutive half-year period.

(3) Export Trends

Actual orders received and shipped were 155.6 billion yen, a year-on-year decrease of 4.6%. Exports fell due to a reduction in exports of base stations, primarily caused by reduced investments by overseas carriers and a slowdown in the European economy that persisted from the previous fiscal year.

(4) Import Trends

Total imports amounted to 1,773.8 billion yen, a year-on-year increase of 18.5%. Imports rose for the second consecutive half-year period, reflecting strong domestic demand for smartphones and the release of new products by major overseas manufacturers towards the end of September.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Orders received and shipped came to 532.9 billion yen, a year-on-year decrease of 7.3%. Of which the total value of domestic shipments totaled 402.7 billion yen, a decrease of 10.9% over the same quarter of the previous year and exports were 130.2 billion yen, an increase of 6.0% over the same quarter of the previous year.

Domestic shipments decreased year on year due to a fall in shipments of mobile terminals and wireless network equipment despite an increase in wired network equipment. Exports saw a significant year-on-year increase, particularly in wireline network equipment, including digital transmission equipment.

[Overview]

In the April-June period of FY2024, the domestic telecom market grew more than expected, largely reflecting the resolution of problems regarding the procurement of semiconductors, an increase in imports of smartphones and data telecom equipment. Going forward, this will lead to an increase in telecom infrastructure-related demand if there is progress in investments in, for example, data centers with the increase in data traffic or in Sub-6 band and stand-alone base stations in association with 5G base stations. Exports declined due to the continued global economic downturn.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 774.5 billion yen in the April through June period, a year-on-year increase of 17.5%. Imports of  telecom equipment produced overseas such as smart phones, routers and switches increased, contributing to the growth of the domestic market.

(2) Domestic Production Trends

Domestic production totaled 70.2 billion yen in April through June, a year-on-year decrease of 18.6%. Domestic production decreased for five consecutive quarters, reflecting inventory adjustments and capital investment reductions impacting a range of models in reaction to an increase in demand in the previous year, as well as lower demand attributable to the downsizing of systems and expansion of cloud services in business equipment for offices.

(3) Export Trends

In the April through June period, total exports amounted to 73.2 billion yen, a decrease of 2.8% year-on-year. Exports decreased for four consecutive quarters, attributable to a significant fall in exports of base stations, despite increased exports of data telecom equipment and parts.

(4) Import Trends

In the April through June period, total imports amounted to 788.7 billion yen, an increase of 18.9%  year on year. Imports increased for the first time in two quarters due to the strong performance of data telecom equipment, as well as a significant increase in imports of smartphones.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Orders received and shipped by Japan-based CIAJ member companies in April through June amounted to 246.1 billion yen, down 12.3% from the same quarter of the previous fiscal year. Of which, the total value of domestic shipments was 188.6 billion yen, representing negative growth of 14.3% over the same quarter of the previous year and exports was 57.5 billion yen, representing negative growth of 5.0% over the same quarter of the previous year.

Domestic shipments decreased year on year, given decreases in terminal equipment and network-related equipment. Exports declined year on year due to a significant decrease in wireline terminal equipment, despite increases in mobile terminal equipment and network-related equipment.

[ Overview ]

In FY2023, in the telecom market there was a recovery in business equipment for offices due to energized business activities, although shipments of certain equipment declined in reaction to their growth in the previous fiscal year. The domestic market of mobile phones shrank, reflecting weak demand and decreased domestic production due partly to business withdrawals, as well as restrained investment related to telecommunication infrastructure. In addition, exports of almost all types of equipment declined due to the global economic downturn.

(1) Domestic Market Trends

The total value of the domestic market (value of domestic production – value of exports + value of imports; excluding parts) stood at 3,594.8 billion yen, down 2.9% year on year. The domestic market decreased for the first time in four years because the total value of the market of network equipment decreased for the first time in seven years due to the sluggish demand for digital transmission equipment and base stations.

(2) Domestic Production Trends

The total value of domestic production was 389.1 billion yen, a year-on-year decrease of 20.0%. It has declined for three consecutive quarters. The production of wireline terminal equipment increased, reflecting a recovery from a decrease caused by the impact of supply restraints. However, the production of land telecommunication devices declined significantly, including mobile phones, an area domestic manufacturers continued to withdraw from. This resulted in a sharp decline in domestic production.

(3) Export Trends

Total exports amounted to 322.8 billion yen, a decrease of 9.8% year on year and the first time in three years there was a decrease. Exports for network equipment, which lead to an increase in traffic, rose partly due to the effect of the weak yen. On the other hand, the total value of exports decreased, reflecting a decline in exports for parts used for the production of smartphones due to the weakness of the global market, including China, where shipments for smartphones continued to fall as a result of the saturation of the number of subscribers and weak economic conditions.

(4) Import Trends

Total imports amounted to 3,582.5 billion yen, a decrease of 0.8% year on year and the first decrease in four years. In mobile phones, while the number of imported units decreased due to extended replacement cycles, the value of imports increased backed by steady demand for high-priced models produced by overseas manufacturers. However, the total value of imports declined due to a decrease in investments in domestic telecommunication infrastructure equipment.

[ Orders Received and Shipped by Japan-based CIAJ Member Companies ]

Orders received and shipped came to 1,169.5 billion yen, down 25.5% year on year. Of this, the total value of domestic shipments was 941.4 billion yen, a decrease of 20.0% over FY2022. The total value of exports was 228.1 billion yen, a fall of 42.1% over FY2022. Domestic shipments dropped year on year, reflecting sluggish capital investment in telecommunication infrastructure equipment and other products. This was also partly due to a decline in shipments of certain types of equipment in reaction to the growth of demand in the previous fiscal year. Exports decreased year on year, reflecting weak demand for almost all types of equipment due to the global economic downturn.

[Overview]

During the period from October to December 2023, the telecom market saw a slowdown in demand for wireline network equipment, with a decrease in digital transmission equipment and base stations attributed to sluggish capital spending by carriers and others. However, imports of smartphones from overseas manufacturers increased significantly in value terms, partly reflecting the impact of a rise in terminal prices and the weak yen.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 1,257.9 billion yen in the October through December period, a year-on-year increase of 23.1%. The domestic market value increased due in part to a significant increase in imports of smartphones manufactured overseas.

(2) Domestic Production Trends

Domestic production totaled 95.5 billion yen in October through December, a year-on-year decrease of 16.1%. It has declined for three consecutive quarters. Production value declined because demand related to wireline networks has slowed, with sluggish demand for digital transmission equipment in particular.

(3) Export Trends

Total exports amounted to 86.7 billion yen in the October through December period. On a year-on-year basis, they declined 15.3％, having decreased for the second consecutive quarter. While exports of network equipment continue to increase with the rise in data traffic, exports of most types of equipment decreased due to the slowdown of the global economy.

(4) Import Trends

In the October through December period, total imports amounted to 1,267.6 billion yen, up 25.5% year on year, having resulted in quarterly imports exceeding 1,000 billion yen. The import value of smartphones from overseas manufacturers increased significantly, partly reflecting a rise in terminal prices and the weak yen.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Actual orders received and shipped in the October through December period was 272.1 billion yen, down 26.9% year-on-year. Of which, the total value of domestic shipments was 219.2 billion yen, representing negative growth of 12.0% over the same quarter of the previous year, and exports was 52.9 billion yen, representing negative growth of 57.0％ over the same quarter of the previous year. Domestic shipments decreased year on year, significantly affected by declining smartphone demand. Exports of many types of equipment declined year on year due to the impact of the overseas economic downturn.

I. Overview

The Japanese economy in FY2021 witnessed a strong rebound from the slowdown caused by COVID-19 the previous year, but lost momentum in FY2022. However, the weaker yen and rising supply costs pushed up the price of mobile handsets, translating into higher demand figures in yen. Among enterprise equipment, recovery of component shortages – including semi-conductors, and a return to working from corporate offices led to increased capital investments. Growth of high-speed large volume data traffic from telework and video-streaming services and an easing of supply limitations contributed to demand for infrastructure/internet equipment. In total, the total demand for telecommunication equipment for FY2022 marked healthy growth amounting to approximately 4.114 trillion yen (+15.7% year-over-year growth).

Despite concerns over weaker domestic consumer spending and capital investment, as well as a backlash of the demand growth in FY2022 for some telecom equipment categories, the yen value for demand in some equipment categories will increase as the price of parts and components and transportation costs go up. Demand for some equipment categories will also rise with further growth in high-speed large volume data traffic. Total demand for telecom equipment in FY2023 is forecast at approximately 4.219 trillion yen (+2.6% year-over-year growth).

Lifestyle transformations in the post-COVID era will include application of new technological advances in 5G/local 5G and beyond 5G/6G to overcome structural societal challenges such as building digital and more resilient supply chains and easing shortages in the labor force. Promoting co-creation spanning multiple industries, including the creation of new voice and image solutions, the use of robots and IoT/AI to reduce the reliance on human labor, innovations in logistics to accommodate domestic manufacturing facilities and autonomous driving, building communication infrastructure networks to support the ever growing high-speed large volume data traffic will contribute to an enriching and comfortable living environment for Japan as well as promote a more digital and carbon-neutral society. The total telecom equipment market value is expected grow to approximately 4.543 trillion yen in FY2028, or an increase of 10.4% over the FY2022 figure.

II. 2023 Forecast

The total telecommunication equipment market figure for FY2023 is forecast at approximately 4.219 trillion yen (+2.6% over FY2022), with the domestic market accounting for about 3.832 trillion yen (+3.5% over FY2022), and exports accounting for 387.4 billion yen (-5.7% over FY2022).

(1) Consumer equipment total: 2.706 trillion yen (+10.2% over FY2022)

• Despite a decrease in the shipment of handsets due to a weaker yen and rising price of components leading to higher price tags that will cause consumers to hold back on new purchases and prolong replacement cycles, the domestic market value is expected to be higher.

(2) Enterprise equipment total: 505.8 billion yen (-6.6% over FY2022)

• Replacements are central to demand for key telephones, PBXs and office-use cordless phones and investments are shifting towards new work and communication styles. The rebound in FY2022 from the easing of the supply squeeze will be followed by a drop in domestic demand, but the total yen value is expected to grow somewhat due to rising cost of components, and thus, higher unit price tags.
• A slowdown following demand growth in FY2022 with the easing of the supply squeeze in addition to the trend of going digital contribute to the negative forecast for office-use facsimiles (including multi-functioning facsimiles). Overseas demand for multi-functioning machines takes up a large share of facsimile exports and like the domestic situation in Japan, changes in work styles abroad is expected to have a negative impact.

(3) Infrastructure equipment total: 557.8 billion yen (-17.6% over FY2022)

• Domestic demand is forecast to decrease after capital investment, mainly in 5G, by telecom carriers reached a peak in FY2022. However, higher material cost is expected to push the value upwards.
• Exports are expected to decrease slightly due to the peaking of 5G investments by carriers abroad in FY2022 despite the recovery from the semi-conductor shortage and the backlog in the supply chain from COVID-19.

(4) Internet equipment total: 320.4 billion yen (+2.5% over FY2022)

• The sudden demand for optical access equipment to accommodate the ”new normal” during COVID-19 has been winding down, but solid demand for optic fiber cables remains intact. Capital spending in routers to meet 5G network expansion and the traffic surge, mostly in mobile, will push up demand. Demand for LAN switches will also grow as facilities are enhanced to accommodate traffic growth and more IoT devices connecting to the network resulting in investment in new configurations. These trends are all expected to result in the growth in value of demand for this category.

(5) Equipment/parts categories not included above: 128.9 billion yen (+1.1% over FY2022)

III. Midterm Projection

The FY2028 total figure is projected at approximately 4.543 trillion yen (+10.4% growth over FY2022), with the domestic market accounting for about 4.163 trillion yen (+12.4% growth over FY2022) and exports accounting for 379.9 billion yen (-7.5% growth over FY2022).

(1) Consumer equipment total 2.977 trillion yen (+10.4% over FY2022)

• The domestic demand for mobile communication terminals is forecast to show gradual growth with higher demand for 5G handsets from FY2026 onwards as services utilizing 5G SA format allows simultaneous access by a greater number of devices at low latency. This is despite the rising price of handsets resulting from the weaker yen and higher material costs that will cause consumers to hold back on new purchases and prolong replacement cycles.
• The global mobile phone market (includes smartphones) in 2022 shrank with the zero-COVID policy in China and concerns over geo-political circumstances combined with higher prices, stunting consumption. Continuing higher prices in 2023 and the need to shrink stockpiled inventory from the previous year will result in less shipments, but the situation is expected to improve, returning to positive growth in FY2024 onwards. Replacement demand for 5G handsets will increase after 2022, culminating in sales revenue in 2027 projected at 350.8 billion U.S. dollars (CAGR -0.03%).

  

(2) Enterprise equipment total: 460.7 billion yen (-14.9% over FY2022)

• Demand for PBXs and office-use cordless phones will be affected by the restructuring of voice communication platforms at offices in connection with work style transformation and further adoption of cloud services, resulting in a continued decrease.
• The domestic market for office-use facsimiles (including multi-functioning facsimiles) will continue to decline with changes in work styles and the shift to digital at both private sector and government offices. Exports are also forecast to decrease for the same reasons as the domestic market.

(3) Infrastructure equipment total: 627.4 billion yen (-7.3% over FY2022)

• Demand for infrastructure equipment is expected to show gradual growth, as networks continue to be enhanced to accommodate the surge in traffic from 5G, local 5G, IoT services, xR contents, like AR/VR and metaverse, as well as network slicing and edge computing, shifts to even more data centers with greater volume and speed capacities and demand growth for disaster information systems. There was special demand for fixed communication equipment (satellite-related) in FY2022, which is expected to result in year-to-year negative growth vs. FY2022 yen value in the following year.
• Exports are expected to continue its growth as new lifestyles take root in the post-COVID era, leading to greater network usage, traffic growth and more data centers.

(4) Internet equipment total: 348.4 billion yen (+11.5% over FY2022)

• The Internet equipment market will continue to address traffic growth from expansion of 10 Gbps optical and 5G network coverage and the further popularity of video content. Positive growth is projected for the category with video communications taking hold at businesses and corporate contents becoming richer, and as new uses of networks like 5G, Wi-Fi 6/6E, xR technologies, metaverse and wider use of digital twin computing leads to traffic growth. The return of manufacturing facilities to Japan will also likely lead to new capital investment in IT.

(5) Equipment/parts categories not included above: 129.8 billion yen (+1.8% over FY2022)

IV. Market Trends in New Businesses

(1) Background to the focus on new equipment and services

• In the past, the focus was on trends in telecom equipment used for providing fixed/mobile phone, ISDN, private leased circuit, and internet services. Telecommunication services, which used to be dedicated to providing a single type of service, have been impacted by technological innovations in ICT and the advancement of digital transformation (DX), leading to the combination of multiple services and solutions that are high-speed, large capacity, high value-added (low latency, multiple simultaneous connectivity, low power consumption, low cost, etc.) with the data processing power of AI and the storage capacity of the cloud. In addition, the use of virtual technologies in place of physical telecommunication equipment has made it possible to provide element technology functions using software on general-purpose equipment.

(2) Scope of the market

• Calculating the demand projections for equipment categories and services in order to gain an understanding of future demand trends while taking into consideration the new telecom equipment and services market are under way. These figures will not be tallied with the demand forecast in section III. When it becomes possible to determine the demand per equipment from the CIAJ orders placed/shipments statistics, they will be phased in with the respective equipment covered in the mid-term demand forecast.

I. Summary

In the telecom market from April to September 2023, prices of certain types of equipment rose on soaring prices of parts and materials. As a result, demand for these types of equipment rose in value terms.
Additionally, demand for certain types of equipment rose, reflecting an increase in high-speed, large-capacity data traffic for telework and video distribution services. Meanwhile, there was a downturn in demand for certain types of equipment following an increase in demand in FY2022, when supply constraints caused by semiconductor shortages eased. Purchases and capital expenditures declined due to the weak yen and higher prices.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 1,482.7 billion yen in the April through September period, a year-on-year decrease of 12.1%. Carriers’ capital expenditures slowed, leading to a decline in the production and import of mobile terminals and wireless network equipment, which resulted in a decrease in the domestic market value.

(2) Domestic Production Trends

Domestic production totaled 177.4 billion yen in April through September, a year-on-year decrease of 14.6%. The production of business-related devices increased as the difficulty in procuring parts and materials was resolved. Meanwhile, investment in communications infrastructure saw sluggish growth. Consequently, domestic production decreased.

(3) Export Trends

Actual orders received and shipped in the April through September period was 163.0 billion yen, decrease 1.9% year-on-year. There was an increase in high-speed, large-capacity data traffic in overseas markets, which led to a rise in demand for systems related to wired networks. However, exports declined for the first time in five half-year periods partly due to a slowdown in the economies of the United States and Europe.

(4) Import Trends

In the April through September period, total imports amounted to1,497.2 billion yen, a 10.6% decrease year on year. Imports of data telecom equipment such as routers and switches increased. However, imports of smartphones declined, reflecting weak demand in Japan. Imports fell for the first time in six half-year periods.

II. Orders Received and Shipped by Japan-based CIAJ Member Companies

Actual orders received and shipped in the April through September period was 574.8 billion yen, down 18.4% year-on-year. Of which, the total value of domestic shipments was 452.0 billion yen, representing negative growth of 13.7% over the same quarter of the previous year and exports was 122.8 billion yen, representing negative growth of 32.1% over the same quarter of the previous year.

Domestic shipments decreased year on year due to a fall in shipments of mobile terminals and wireless network equipment despite an increase in wired network equipment. Exports of almost all types of equipment declined year on year, reflecting subdued investment due to a slowdown in the global economy.

The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment production and trade figures for FY2023 (April-June) as follows.

[Overview]

In the April-June quarter of FY2023, the telecom market stopped short of achieving a full recovery, reflecting a decrease in the shipping quantity of certain types of equipment due partly to increased inventory in the previous fiscal year, while the shipping quantity of key telephones, intercoms and other types of equipment increased, attributable to a recovery from problems with the procurement of parts and materials, including semiconductors.

The shipping quantity of mobile phones declined significantly, reflecting a prolonged purchase replacement cycle as a result of rises in prices of terminals in tandem with high prices and surges in parts and materials prices. However, if the installation of 5G communication infrastructure with wider areas and frequency band increases in the future, it would advance the launch of mobile terminals which feature new technology and functions in response to new services, etc., and would lead to an increase in demand for mobile backhaul and other infrastructure.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 658.9 billion yen in the April through June period, a year-on-year decrease of 16.0%. The domestic market contracted, reflecting decreases in the import and production of smartphones, etc. due to sluggish demand.

(2) Domestic Production Trends

Domestic production totaled 86.2 billion yen in April through June, a year-on-year decrease of 11.3%. Domestic production decreased after two quarters as the shipping quantity of many types of equipment decreased, partly due to the impact of increased inventory in the previous fiscal year, despite the increased production of many other types which recovered from the difficulty in procuring semiconductor and other parts and materials.

(3) Export Trends

Actual orders received and shipped in the April through June period was 75.4 billion yen, up 4.9% year-on-year. Exports increased for four consecutive quarters, attributable to a rise in exports of data telecom equipment, which offset a fall in exports of parts for globally stagnant smartphones.

(4) Import Trends

In the April through June period, total imports amounted to 663.3 billion yen, a 15.0% decrease year on year. Imports decreased for the first time in the past six quarters, due to a decrease in imports of smartphones produced overseas which reflected weak demand, while imports of data telecom equipment such as routers and switches were brisk.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Actual orders received and shipped in the April through June period was 280.7 billion yen, down 18.5% year-on-year. Of which, the total value of domestic shipments was 220.2 billion yen, representing negative growth of 17.2% over the same quarter of the previous year and exports was 60.5 billion yen, representing negative growth of 22.6% over the same quarter of the previous year.

Domestic shipments decreased year on year, given decreases in terminal equipment and network-related equipment. Exports decreased year on year, due to significant decreases in mobile terminals and wireless network equipment, despite increases in wireline terminals and network-related equipment.

The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment production and trade figures for FY2022 (April-March) as follows.

[ Overview ]

In FY2022, the telecom market saw a recovery in business equipment such as key telephones, PBXs and cordless telephones for offices against the backdrop of energized business activities due to the easing of parts supply challenges caused by the semiconductor shortage, while there was strong domestic demand for wireline network equipment to enhance network infrastructure in addition to steadily increasing exports supported by the effects of the weaker yen. However, base station communications equipment remained sluggish due to the slow progress of capital investment in 5G SA base stations and millimeter-wave compatible base stations.

(1) Domestic Market Trends

In FY2022, the total value of the domestic market (value of domestic production – value of exports + value of imports; excluding parts) stood at 3,703.3 billion yen, up 13.1% year over year. The domestic market expanded due to a recovery in the types of equipment which had supply constraints caused by parts shortages resolved and due to an increase in types of equipment of which imports increased thanks to the positive effects of the weaker yen.

(2) Domestic Production Trends

The total value of domestic production in FY2022 was 484.7 billion yen, 1.0% lower than the previous year. A decrease has been recorded for two consecutive years. Domestic production decreased slightly due to the sluggish production of mobile terminal equipment and wireless network equipment despite steady conveyance device-related production and a recovery in the production of types of equipment that were previously sluggish due to the effects of the restrictions on parts supply.

(3) Export Trends

The total figure for exports in FY2022 was 358.0 billion yen, rising 7.7% over FY2021, an increase for the second consecutive year. Although exports of parts decreased affected by the global slowdown in demand for smartphones, exports as a whole grew due to increased exports of network equipment associated with active investment for the enhancement of network infrastructure in addition to the effects of the weaker yen.

(4) Import Trends

The total figure for imports in FY2022 was 3,612.9 billion yen, an increase of 13.3% over FY2021, exceeding 3 trillion yen for two consecutive years. The number of imported mobile phones decreased as replacement cycles are extended reflecting the rising prices of goods and the rising price of terminals to transfer the soaring materials prices, but the amount of mobile phones imported increased backed by steady demand for high-priced models made by overseas manufacturers and the effects of the depreciation of the yen.

[ Orders Received and Shipped by Japan-based CIAJ Member Companies ]

Actual orders received and shipped in FY2022 were 1,570.9 billion yen, up 13.3% year on year.

Of which the total value of domestic shipments totaled 1,176.7 billion yen, an increase of 5.4% from the previous year) and exports were 394.2 billion yen, an increase of 45.7% from the previous year). Domestic shipments increased year on year with the positive effects of a large fixed communications equipment project that surpassed the negative impact of a decrease in mobile phones which saw their replacement cycles extended. Exports increased year on year partly due to the effects of the weaker yen, despite the slowdown of overseas economies.

[Overview]

In October through December 2022, the telecommunication equipment market saw growth in demand for wireline terminal and wireline network equipment due to the easing of parts supply challenges caused by the effects of the COVID-19 pandemic and semiconductor shortages. Exports of types of equipment that are in strong demand also increased due to the impact of a weaker yen. However, base station communication equipment remained sluggish in the absence of capital investment in 5G SA base stations which utilize the features of 5G.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 998.4 billion yen in the October through December period, a year-on-year increase of 10.0%. The increase reflects a recovery in production from the slump caused by the effects of restrictions in parts supply, combined with a surge in imports driven by a weaker yen.

(2) Domestic Production Trends

The value of domestic production in October through December was 90.1 billion yen, representing positive growth of 1.0% over the same quarter of the previous year and marking the second straight positive quarter.
(Year-on-year growth is calculated excluding mobile phone production data, which has become confidential.)

Domestic production increased due to steady conveyance device-related production and recovery in the production of types of equipment that was previously sluggish due to the effects of restrictions on parts supply.

(3) Export Trends

Total exports amounted to 102.4 billion yen for October through December, a year-on-year increase of 15.0％. It has increased for two consecutive quarters. Exports of network equipment increased, unaffected by the slowdown of overseas economies and, with parts shortages also becoming less acute, exports of parts rose for the first time in five quarters.

(4) Import Trends

In the October-through-December period, total imports amounted to 1,009.7 billion yen, a 12.6％ increase year on year. This was the first time since the third quarter of FY2017 that quarterly imports exceeded 1 trillion yen. Imports of most types of equipment, except parts, increased, partly because the yen lost around 20% of its value against the dollar.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Actual orders received and shipped in the October-through-December period was 372.0 billion yen, up 12.0% year-on-year. Of which, the total value of domestic shipments was 249.0 billion yen, representing negative growth of 7.0% over the same quarter of the previous year. The year-on-year decline is largely attributable to falling smartphone demand.

Exports amounted to 123.1 billion yen, representing positive growth of 90.8% over the same quarter of the previous year. The year-on-year increase was due to the recovery of capital investment overseas combined with the impact of a weaker yen.

I. Overview

Effective measures to control the spread of COVID-19 and easing limits on economic activities in FY2021 led to a rise in consumer spending and capital investments, but the surge in the number of the omicron variant infections in the latter half of the year caused supply shortages and disruptions in logistics. While the limited availability of supplies weighed down some telecom equipment categories, changes in peoples’ lifestyles, installation of new solutions at offices/factories, rapid acceptance of new digital technologies to transform society (DX) together with building core infrastructure, including telecommunications, and implementation of new technologies, such as 5G, pushed up demand to a total of approximately 3.553 trillion yen (+7.6% year-over-year growth).

Expectations for a sustained economic recovery in FY2022 is high, as socio-economic activities resume a sense of normalcy and many telecom equipment categories are expected to show positive growth, rebounding from low production and unfulfilled orders the previous year due to the supply restrictions. Exports are also expected to be robust as many categories benefit from a weaker yen. Total demand for telecom equipment in FY2022 is forecast at approximately 3.844 trillion yen (+8.2% year-over-year growth).

New services meeting the needs of society and improving the quality of life, such as the metaverse, changes in work styles to improve productivity, new ICT equipment utilizing 5G and beyond 5G/6G technologies and the associated enhancement of telecom infrastructure and networks to support the high speed and volume of data traffic will all contribute to further the shift to digital and the reduction of carbon footprint. The total telecom equipment market value is expected grow to approximately 4.630 trillion yen in FY2027, or an increase of 30.3% over the FY2021 figure.

II. 2022 Forecast

The total telecommunication equipment market figure for FY2022 is forecast at approximately 3.844 trillion yen (+8.2% over FY2021), with the domestic market accounting for about 3.459 trillion yen (+6.0% over FY2021), and exports accounting for 385.2 billion yen (+33.2% over FY2021).

(1) Consumer equipment total: 2.253 trillion yen (+6.0% over FY2021)

• Despite a decrease in the shipment of handsets due to the drop in the value of the yen and rising prices of components leading to higher price tags that will cause consumers to hold back on new purchases and prolong replacement cycles, the total yen value is expected to be higher.
• Steady demand among older adults for cordless phones continues but will not be enough to reverse the overall downward trend. Manufacturers are concentrating efforts to enhance capacity for blocking unwanted telemarketing calls or assisting in identifying calls from scam artists.

  

(2) Enterprise equipment total: 506.3 billion yen (+19.6% over FY2021)

• Replacements are central to demand for key telephones, PBXs and office-use cordless phones and while investments are shifting towards new work and communication styles, the gradual easing of the supply squeeze for semiconductors will lead to a recovery of domestic demand.
• The trend towards decreasing in-office tasks and the promotion of going digital are negative factors for office-use facsimiles (including multi-functioning facsimiles), but there are signs of capital investments picking up after the prolonged postponement. Overseas demand for multi-functioning machines takes up a large share of facsimile exports and with the weaker yen, the total value is expected to increase.

(3) Infrastructure equipment total: 617.4 billion yen (+12.6% over FY2021)

• Continued investment in digital transmission equipment and base stations for 5G and government budget allocation for disaster-related systems leads to a positive growth forecast. However negative factors are also in play, due to lasting component procurement difficulties from the semi-conductor supply shortage.
• Exports are expected to increase with the gradual recovery of the limitations in supplies from the semi-conductor shortage and the backlog in the supply chain from COVID-19 resulting in the resumption of economic activities abroad. At the same time, telecom carriers rethinking their dependency on single vendors to avoid procurement risks has also led to a positive growth forecast.

(4) Internet equipment total: 307.4 billion yen (+2.6% over FY2021)

• The sudden demand for optical access equipment to accommodate the ”new normal” of COVID-19 has been winding down, but the solid demand for optic fiber cables remains intact. Capital spending in routers to meet 5G network expansion and the traffic surge, mostly in mobile, will push up demand. Demand for LAN switches will also grow as facilities are enhanced to accommodate traffic growth and more numerous devices connecting to the network resulting in investment in its configuration. These trends are all expected to result in the growth in value of demand for this category.

(5) Equipment/parts categories not included above: 159.3 billion yen (+2.5% over FY2021)

III. Midterm Projection

The FY2027 total figure is projected at approximately 4.630 trillion yen (+30.3% growth over FY2021), with the domestic market accounting for about 4.239 trillion yen (+29.9% growth over FY2021) and exports accounting for 391.0 billion yen (+35.2% growth over FY2021).

(1) Consumer equipment total 2.909 trillion yen (+36.8% over FY2021)

• The domestic demand for mobile communication terminals is forecast to show gradual growth with widespread 5G availability and related services such as the metaverse. This is despite the rising price of handsets resulting from the separation of communication costs from the price of devices and the weaker yen. In addition, greater demand is expected for 5G-compatible M2M modules, which allow simultaneous access by a greater number of devices.
• The global mobile phone market (includes smartphones) in 2021 grew from replacement demand for 5G handsets, mainly in developed countries, despite worries of supply issues resulting from the shortage in semi-conductors. The instability of the supply-chain caused by lockdowns from the zero-COVID policy in China and concerns over geo-political circumstances are expected to dampen consumer appetites and revert to negative demand for 2022. These trends are forecast to ease from 2024 onwards, with increase in demand for replacement 5G handsets, culminating in sales revenue in 2026 projected at 401.7 billion U.S. dollars (CAGR +1.0%).
• Overall demand for cordless phones is forecast to continue declining with widespread use of smartphones and mobile devices and the market will mainly focus on use among older adults. However, it is not expected to drop below the figure for FY2021, which experienced a significant drop due to shortages in supplies and manpower at overseas manufacturing sites.

(2) Enterprise equipment total: 463.3 billion yen (+9.5% over FY2021)

• Replacement is the core to demand for key telephones, PBXs and office-use cordless phones. The restructuring of voice communication platforms at offices in connection with work style transformation and further adoption of cloud services are expected to result in a slight decrease.
• The domestic market for office-use facsimiles (including multi-functioning facsimiles) will continue to decline with changes in work style and the shift to digital at both private sector and government offices. However, exports are forecast to surge compared to FY2021 as component supply issues are resolved and also due to the weaker yen.

(3) Infrastructure equipment total: 751.2 billion yen (+37.0% over FY2021)

• Demand for infrastructure equipment will slow by FY2023 as the round of investment towards high-speed/large volume 5G wanes, but is expected to increase overall, as networks continue to be enhanced to accommodate the surge in traffic from 5G, local 5G and IoT services, the market embracing large volume streaming services, including 4K/8K contents, xR contents, like AR/VR and metaverse, as well as network slicing and edge computing, shifts to even more data centers with greater volume and speed capacities and demand growth for disaster information systems.
• Exports are expected to continue its growth. This is partly due to telecom carriers abroad moving away from relying on single vendor procurement to reduce dependency risks from FY2020, giving Japanese vendors a chance to enter overseas carrier ecosystems and the emergence of O-RAN business opportunities.

(4) Internet equipment total: 339.5 billion yen (+13.3% over FY2021)

• The Internet equipment market will continue to address traffic growth from expansion of 100Gbps optical and 5G network coverage and the further popularity of video content. The embracing of cloud services and related virtual technologies and higher cost of components due to the weaker yen translating into higher price tags for the finished product are negative factors, but positive growth is projected for the category with video communications taking hold at businesses and corporate contents becoming richer, moves towards 5G compatibility, new uses of networks like Wi-Fi 6, xR technologies, metaverse and wider use of digital twin computing leading to traffic growth as well as a return of manufacturing facilities to Japan.

(5) Equipment/parts categories not included above: 166.2 billion yen (+7.0% over FY2021)

IV. Market Trends

(1) Potential of Web3 (blockchain technology)

• Introduces and summarizes the impact and possibilities of Web3, or blockchain technology, and its derivative technologies – NFT (non-fungible token), DeFi (decentralized finance), ReFi (regenerative finance) and DAO (decentralized autonomous organization.
  1. Blockchain, a basic technology of Web3.
  2. Trends in economic security and information security.
  3. Emergence of cloud services in the new normal.

(2) ICT applications in Japan’s digital policies

• The section will provide an overview of the Japanese government’s “Vision for a Digital Garden City Nation,” looking at the Digital Agency’s measures, achievements and challenges. It will also consider what impact several national policies, including those concerning carbon neutrality, strengthening Japanese territory and assuring economic stability will have on demand trends in info-communication equipment.
  1. “Vision for a Digital Garden City Nation” and the Digital Agency’s achievements and challenges.
  2. Trends in carbon neutrality, strengthening Japanese territory and assuring economic stability.

(3) Services expected to growth with the utilization of ICT

• Looks at specific use case scenarios that have emerged from new trends and technologies mentioned in “(1) Possibilities of Web3 (blockchain technology).”
  1. Embracing of Web3, NFT, DAO, DeFi and metaverse by the economic society.
  2. The spread of xR technologies in various industries and new developments.

[Forecasting methodology]

• Domestic market forecast: Based on past actual orders received and shipment statistics compiled by CIAJ. For areas not covered by CIAJ, we received the cooperation of InfoCom Research, Incorporated and interviewed CIAJ members.
• Global market forecasts: Data and analysis provided by the global research company Omdia was referred to and utilized with the cooperation of InfoCom Research, Incorporated.

The Communications and Information network Association of Japan (CIAJ) announces the telecommunication equipment production and trade figures for April through September, 2022 as follows.

I. Summary

In the telecom market from April to September 2022, demand for key telephones and PBXs increased while the difficulty of purchasing their components began to decrease. Demand for facsimile machines (including multifunction machines) also grew with strong exports backed by a weaker yen. Meanwhile, demand related to 5G base stations was sluggish, reflecting a slowdown in investments in the NSA system for the development of high-speed, high-capacity areas.

II. Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 1,685.2 billion yen in the April through September period, a year-on-year increase of 15.1%.

The domestic market value increased, offsetting a decrease in domestic production value, due in part to an increase in the import of smartphones, including a high volume of shipments of summer models.

III. Domestic Production Trends

Domestic production totaled 206.9 billion yen in April through September, a year-on-year decrease of 8.0%.

Production of business-related devices increased as the difficulty of purchasing components began to ease. However, domestic production declined in two consecutive half-year periods principally due to a slowdown in demand for communication infrastructure.

IV. Export Trends

Actual orders received and shipped in the April through September period was 166.1 billion yen, up 1.7% year-on-year.

While the export of components used in overseas smartphone production decreased, export value grew in three consecutive half-year periods thanks to growth in demand in overseas markets where the resumption of economic activity is increasing.

V. Imports

In the April through September period, total imports amounted to 1,673.6 billion yen, a 16.8% increase year on year.

The import value increased in four consecutive half-year periods thanks to strong sales of data communication devices, including routers and switches and transmission equipment, in line with demand for the transition of networks to fiber-optic cables, in addition to the high domestic demand for smartphones.

[Orders Received and Shipped by Japan-based CIAJ Member Companies]

Actual orders received and shipped in the April through September period was 704.5 billion yen, up 5.1% year-on-year.

Of which the total value of domestic shipments totaled 523.6 billion yen, a decrease of 1.3% over the same quarter of the previous year and exports was 181 billion yen, an increase of 29.8% over the same quarter of the previous year.

Domestic shipments decreased year on year due to a fall in shipments of mobile terminals and network equipment despite an increase in wireless, satellite-based products while wired terminal equipment and network equipment increased. Exports grew year on year as a result of a significant increase in wired terminals and network equipment partly due to economic recoveries overseas.

I. Summary

In the April-June quarter of FY2022, the telecom market saw progress in construction works to expand optical cable networks and network infrastructure-related equipment was once again in an upward trend. However, 5G base station-related demand was weak as the capital investment cycle came to an end, and business-related equipment (excluding facsimiles and PBXs) was also sluggish under the impact of parts supply problems, which, though easing, are still ongoing.

II. Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 783.7 billion yen in the April through June period, a year-on-year increase of 3.7%.

Due to a rise in imports of smartphones, which account for the majority of the value of imports, the increase in import value was greater than the decrease in domestic production value.

III. Domestic Production

Domestic production totaled 96.8 billion yen in the April through June period, a year-on-year decrease of 15.7%.

Domestic production decreased for a fourth consecutive quarter, mainly reflecting an end to the surge in demand for 5G communication infrastructure and decreased production due to parts supply problems.

IV. Exports

Total exports amounted to 71.8 billion yen in the April through June period, a year-on-year decline of 13.0％ and the first decline for five quarters.

Exports of components for smartphones produced overseas decreased due to the effects of lockdowns and other measures in China and a slump in the smartphone market. Exports of smartphones and base stations to the U.S. grew.

V. Imports

Total imports amounted to 779.4 billion yen in the April through June period, a year-on-year increase of 5.7% and the second consecutive quarter of growth.

Coinciding with the recovery in demand for smartphones, imports of smartphones produced overseas, increased. Imports of data telecom equipment such as routers and switches were also brisk, making up for the decline in value of domestic production, and the value of the domestic market increased.

[ Orders Received and Shipped by Japan-based CIAJ Member Companies ]

Actual orders received and shipped in the April through June period was 344.2 billion yen, up 3.3% year-on-year.

Of which the total value of domestic shipments totaled 266.0 billion yen, representing positive growth of 4.7% over the same quarter of the previous year and the total value of domestic exports was 78.2 billion yen, representing negative growth of 1.3% over the same quarter of the previous year.

Domestic shipments of terminal equipment decreased, while those of network equipment increased. Exports of wireless network equipment fell.

The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment production and trade figures for FY2021 (April-March) as follows.

I. Summary

In FY2021, telecom market demand for 5G communications infrastructure remained firm. Meanwhile, demand began to recover for business-use equipment such as office-use cordless handsets, intercoms and PBX, for which the industries sought to win orders and undertake installation through initiatives that mitigate the impact of COVID-19. However, demand from domestic manufacturers for almost all equipment stalled due to supply restrictions caused by parts shortages.

II. Domestic Market Trends

In FY2021, the total value of the domestic market (value of domestic production – value of exports + value of imports; excluding parts) stood at 3,249.0 billion yen, up 7.7% year over year. The major factor for this was an increase in imports of mobile phones, which account for the majority of the value of imports, especially smartphones from overseas manufacturers.

III. Domestic Production

The total value of domestic production in FY2021 was 466.3 billion yen, a decrease of 5.1% over FY2020.

Domestic production decreased for the first time in three years, mainly due to a decline in production resulting from the parts supply problem and a backlash to special demand for infrastructure investment for the nationwide development of optical cable networks in the previous fiscal year. (Since mobile phones were excluded from the surveyed categories in 4Q, the graph includes the estimated production value.)

IV. Exports

The total figure for exports in FY2021 was 332.5 billion yen, rising 18.4% over FY2020 for the first increase in four years. Exports of base stations to the U.S. increased. Demand for parts for smartphone production for emerging Asian countries was recovering, but exports to China were declining. As a result, the ratio of parts to China as a whole decreased.
In contrast, the ratio of parts to the U.S. increased.

V. Imports

The total figure for imports in FY2021 was 3,187.7 billion yen, an increase of 11.3% over FY2020. In line with the recovery in demand for smartphones, imports of smartphones produced overseas, especially those made by foreign manufacturers, increased. Imports of base stations decreased as domestic demand for base stations was sluggish.

VI. Orders Received and Shipped by Japan-based CIAJ Member Companies

Total orders received and shipped by Japan-based CIAJ member companies in FY2021 amounted to 1,386.8 billion yen, down 3.4% from FY2020.

Of which the total value of domestic shipments totaled 1,116.2 billion yen, a decrease of 5.5% over the same quarter of the previous year) and exports were 270.5 billion yen, an increase of 6.3% over the same quarter of the previous year).

Domestic shipments of terminal equipment decreased slightly, while those of network equipment declined significantly. Exports of wireless network equipment increased.

The Communication and Information Network Association of Japan (CIAJ) announces the telecommunication equipment and trade figures for the Third Quarter (October-December) of FY2021 as follows.

I. Summary

In October through December 2021 (third quarter), both private consumption and capital expenditure in the Japanese economy improved, and the annualized rate of real GDP growth for the Oct-Dec quarter was positive 4.6% (second preliminary figure: March 9). This was the first time it was positive in two quarters. This partly reflects the easing of restrictions on economic activity following the government ending the state of emergency that was declared due to the COVID-19 pandemic.

In these circumstances, the telecom market saw demand for 5G-compatible smartphones and communication infrastructure begin to recover but declined year on year due to a fall in demand for certain models in reaction to the growth in the previous year and a fall in production of some models reflecting restrictions in parts supply.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 907.3 billion yen in the October through December period, a year-on-year decrease of 7.4%. The decrease resulted from reduction in production and a decrease in import of mobile phones.

(2) Domestic Production Trends

Domestic production totaled 116.7 billion yen in October through December, a year-on-year decrease of 15.1%. It has declined for two consecutive quarters. Production decreased due to a fall in production in reaction to the enhancement of networks in the previous year and the impact of a decrease in production caused by restrictions on parts supply.

(3) Export Trends

Total exports amounted to 89.0 billion yen for October through December, a year-on-year increase of 10.8％. It has increased for three consecutive quarters. Exports of parts for overseas smartphone production decreased, but shipments of mobile phones and base stations increased.

(4) Import Trends

In the October through December period, total imports amounted to 896.3 billion yen, a 4.6% decrease year on year. Data communication equipment increased due to the improvement of capital expenditure in Japan, but mobile phones declined compared to mobile phones from overseas manufacturers that were released in October of the previous year.

II. Domestic Market Trends

(Aggregated by CIAJ based on Indices of Industrial Production and Trade Statistics of Japan)

(1) Detailed trends by category

Actual figures by category for October through December are as follows:

The size of the domestic market (including the value of imports of foreign brands) was calculated from government figures, the Indices of Industrial Production and Trade Statistics of Japan, according to the following formula: Domestic market size = value of domestic production – value of exports + value of imports

1. Terminal equipment : 619.1 billion yen (-10.9% over the same period of the previous year)

2. Network equipment : 289.3 billion yen (+1.0% over the same period of the previous year)

III. Domestic Production

(Based on Indices of Industrial Production compiled by the Ministry of Economics, Trade and Industry)

(1) Detailed trends by category

Actual figures by category for October through December are as follows

1. Wireline terminal equipment

   9.4 billion yen (-11.9% over the same quarter of the previous year). Of this, telephone sets was 0.4 billion yen (-22.7% over the same period of the previous year), key telephones 3.1 billion yen (-5.3%), and intercoms 5.8 billion yen (-14.3%). While domestic production is declining due to limited supply of semiconductors and electronic parts, key telephones remained flat year on year during the Apr-Dec period.

2. Mobile terminal equipment

   36.3 billion yen (-17.5% over the same quarter of the previous year). Of which, mobile phones was 27.5 billion yen (-1.1% over the same quarter of the previous year). Domestic production of mobile phones decreased due to a decline in demand that began in the third quarter and a shift to low-priced models. Demand for land telecommunication devices and maritime and aeronautical mobile communications equipment began to recover but domestic production decreased, mainly reflecting restrictions in parts supply.

3. Wireline network equipment

   34.9 billion yen (-19.2% over the same quarter of the previous year). Of this, central office switching systems and private branch exchanges (PBXs) totaled 5.4 billion yen (-31.5% year on year), digital transmission equipment was 16.3 billion yen (-10.9% year on year), and other transmission equipment was 13.2 billion yen (-22.6% year on year). Domestic production of PBXs decreased due to the continued shortage of semiconductors. Domestic production of digital transmission equipment decreased due to a reactionary fall from the same quarter of the previous year and restrictions in supply attributed to the semiconductor shortage.

4. Wireless network equipment

   25.2 billion yen (+0.8% over the same quarter of the previous year). Of which, fixed telecommunication devices were 5.6 billion yen (-18.9% over the same quarter of the previous year) and base station equipment was 19.6 billion yen (+8.2% over the same quarter of the previous year). Domestic production of fixed communications equipment decreased, reflecting a decline in demand for products for government offices and products for the private sector. Domestic production of base station communications equipment continued to increase thanks to the full-scale investment in base stations for commercial 5G services.

5. Network access equipment

   4.1 billion yen (-51.2% over the same quarter of the previous year) Demand for products for the private sector was sluggish due to the COVID-19 pandemic, and domestic production decreased primarily due to limited parts supply.

6. Wireline parts (relays and repeaters for wired equipment)

   6.9 billion yen (+9.3% over the same quarter of the previous year). Domestic production of wireline parts increased, reflecting the need to resolve the domestic parts supply problem and export them for overseas smartphone production.

IV. Exports

(Compiled by CIAJ, based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures by category from October to December are as follows:

1. Telephone sets and terminal equipment 7.7 billion yen (-43.2％ over the same quarter of the previous year).

   Of which, mobile phones was 6.9 billion yen (+59.5% over the same quarter of the previous year), cordless handsets for landline phones was 10 million yen (-86.4% over the same quarter of the previous year), and other was 800 million yen (-21.8% over the same quarter of the previous year). Mobile phones were exported mostly to the U.S., and the exports increased.

2. Network equipment 35.2 billion yen (+25.4％ over the same quarter of the previous year).

   Of which, base stations was 8.7 billion yen (+4177.5% over the same quarter of the previous year), data communication equipment was 26.0 billion yen (-4.3% over the same quarter of the previous year) and other network equipment was 600 million yen (-19.7% over the same quarter of the previous year). Base stations were exported mostly to the U.S., and exports increased significantly.

3. Parts (both wireline and wireless) 46.1 billion yen (-1.7％ over the same period of the previous year)

   Overseas smartphone production began to decline in the third quarter and export of components for smartphone production decreased.

(2) Detailed trends by region

The results by region for the October through December period include 51.4 billion yen for Asia (-4.4% year on year), in which exports to China totaled 27.7 billion yen (+24.3% year on year). North America was 28.7 billion yen (+78.7% over the same quarter of the previous year), of which the U.S. was 28.1 billion yen (+79.1% over the same quarter of the previous year). Europe was 7.2 billion yen (-17.1% over the same quarter of the previous year), of which the EU was 5.0 billion yen (-15.2% over the same quarter of the previous year). Among exports to the U.S., exports of mobile phones and base stations increased significantly. Exports of components for China increased in line with the recovery of the Chinese economy.

(3) Comparison and breakdown by region

V. Imports

(Compiled by CIAJ, based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures by category from October to December are as follows:

1. Telephone sets and terminal equipment 580.1 billion yen (-10.0％ over the same quarter of the previous year).

   Of this, mobile phones was 577.9 billion yen (-9.9% over the same quarter of the previous year), cordless handsets for landline phones was 600 million yen (-61.5% over FY2018), and other was 1.7 billion yen (+5.0% over the same quarter of the previous year). Imports of mobile phones decreased due to the decline in domestic demand that began in the third quarter. Imports of cordless handsets for landline phones decreased, reflecting stagnant production at overseas plants attributed to shortage of parts supply and labor.

2. Network equipment 260.3 billion yen (+9.4％ over FY2020)

   Of this, base stations was 23.1 billion yen (-28.5% over FY2020), data communication equipment was 231.7 billion yen (+16.5% over FY2020) and other network equipment was 5.5 billion yen (-17.6% over FY2020). Import of data communication equipment (router switches and other products (transmission equipment, communications equipment, modems, etc.)) increased due to capital expenditures for data center equipment, etc.

3. Parts (both wireline and wireless) 55.8 billion yen (-2.1％ over the same period of the previous year)

(2) Detailed trends by region

The results by region for the October through December period include 859.2 billion yen from Asia (-4.8% year on year), in which imports from China totaled 692.9 billion yen (-0.6% year on year). North America was 12.3 billion yen (+0.1% over the same quarter of the previous year), of which the U.S. accounted for 10.8 billion yen (-1.2% over the same quarter of the previous year). Europe was 16.2 billion yen (-0.6% over FY2020), of which the EU was 15.5 billion yen (-0.5% over FY2020).

Asia declined year on year due to a decrease in import of mobile phones, offsetting the increase in import of data communication equipment that enjoyed strong demand.

(3) Comparison and breakdown by region

VI. Trends in Orders Received and Shipped

(1) Results in October through December, 2021

CIAJ statistics for total orders received and shipped in October through December amounted to 332.1 billion yen, representing a decrease of 16.9% year on year. This includes 267.6 billion yen for domestic shipments, which fell by 15.8% year on year, and 64.5 billion yen for exports, which dropped 21.0% year on year.

*Orders received and shipped by CIAJ member companies (domestic manufacturers) = value of domestic production + value of imports produced overseas = domestic shipment + export value

(2) Trends by category

Actual figures by category from October to December are as follows:

1. Wireline terminal equipment 113.9 billion yen (-11.6％ over the same period of the previous year)

   Orders received and shipment of intercoms began to recover from the impact of COVID-19, and demand from homes and offices increased. Shipments of telephone sets and office-use cordless handsets decreased due to a shortage of parts supply and labor for production at overseas plants. Orders received and shipment of personal facsimiles (including multifunction printers) and business facsimiles (including multifunction printers) were also stagnant due to parts shortages and logistics disruption, which affected not only the domestic market but also exports. As a result, wireline terminal equipment as a whole decreased year on year.

2. Mobile terminal equipment 109.0 billion yen (-7.2％ over the same period of the previous year)

   Mobile phones began to slow down compared to the previous year in the third quarter and decreased year on year, despite the release of new 5G-compatible smartphones and replacement demand reflecting the planned 3G termination. Shipment of other mobile terminal equipment was also sluggish both in Japan and abroad.

3. Wireline network equipment 49.9 billion yen (-26.7％ over the same quarter of the previous year).

   Shipment of most models of business-use equipment such as key telephones and PBXs decreased due to the shortage of semiconductors and other parts. Digital transmission equipment and PON/MC decreased in part due to a reactionary fall from the maintenance of optical cable networks across the country, including the GIGA School Program, in the previous year and shipment decreased in overall wired network equipment.

4. Wireless network equipment 43.2 billion yen (-37.4％ over the same quarter of the previous year).

   Among fixed communications equipment, demand for satellite products for government offices and exports increased, but the overall wireless network equipment declined year on year as investment in base station communications equipment for 5G mobile phones has run its course.

5. Other network equipment 7.4 billion yen (-18.9％ over the same period of the previous year).

   Routers and LAN switches declined due to supply shortages that began in the third quarter reflecting the impact of parts shortages.

6. Communication equipment parts 8.7 billion yen (+25.1％ over the same period of the previous year)

VII. Domestic Production, Imports and Exports for Calendar Year 2021

(1) Domestic market trends for calendar year 2021

The size of the domestic market stood at 3,239.4 billion yen for the period from January through December 2021, up 14.9％ from the previous year. Demand for terminal equipment, which had declined due to lowering of consumer willingness to buy reflecting the impact of the COVID-19 pandemic, began to recover in the second half of 2020 and remained strong throughout 2021. Meanwhile, overall communication equipment grew year on year as demand for network equipment increased due in part to the construction of communication infrastructure for commercial 5G services.

(2) Domestic production for calendar year 2021

Domestic production from January to December 2021 stood at 501.7 billion yen, down 2.2％ from the previous year. Other mobile terminal equipment, including commercial radio terminals, and wireline network equipment such as digital transmission equipment declined due to a reactionary fall of demand from the significant growth in the previous year.

Terminal equipment also decreased due to stagnant production that resulted from parts shortages.

(3) Exports for calendar year 2021

Exports from January through December 2021 stood at 320.7 billion yen, up 13.6％ year on year. Exports increased for the first time in four calendar years as exports of parts grew due to expansion of overseas smartphone production, reflecting a decline in the impact of the COVID-19 pandemic, and further, exports of mobile phones and base stations to the U.S. increased.

(4) Imports for calendar year 2020

Imports for January through December 2021 stood at 3,131.9 billion yen, up 17.5％ from the previous year. Imports for calendar year exceeded 3,000 billion yen for the first time as imports of mobile phones, which account for a large proportion of total imports, remained strong during the first half of 2021 and imports of base stations and “other products (transmission equipment, communications equipment, modem, etc.)” in data communications equipment increased further from the previous year, reflecting strong demand related to networks.

The Communications and Information network Association of Japan (CIAJ), a general incorporated association, released its “Mid-Term Demand Forecast for Telecommunication Equipment,” covering FY2021 through FY2026.

I. Outline　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　

Despite the significant slowdown of the Japanese economy in FY2020 due to the COVID-19 pandemic, greater investment in telecommunication infrastructure to accommodate the surge in traffic from telework and remote learning during the state of emergency, demand for mobile devices as the end of 3G service approaches and the switch to 5G handsets all led to the total demand for telecom equipment in FY2020 of 3.301 trillion yen (+2.9% year-over-year growth).

Japan’s measures to curb the spread of the virus, such as widespread vaccinations, contributed to signs of resumption of economic activities in FY2021. In the telecommunication equipment market, risk factors, such as disruptions in the supply chain and shortages in semiconductors exist, but the rise in traffic from the promotion of digital transformation (DX) and installation of 5G base stations gains momentum, with the total demand for telecom equipment in FY2021 forecast at 3.432 trillion yen (+4.0% year-over-year growth).

The ICT industry from FY2022 onwards will take advantage of COVID-19 measures to meet diverse social needs – the continuation of everyday life, such as commuting to work and attending school, undisrupted business, such as manufacturing and sales activities – if and when another pandemic or natural disaster occurs. This will be realized in the form of providing new 5G, beyond 5G/6G and/or AI info-communication terminals and services to the market, which, in turn, will require communication infrastructure, including optical transmission, to process the rise in data traffic. This evolution will further promote digitalization that will lead to greater economic growth and productivity for the entire society. The total telecom equipment market value is expected grow to 4.362 trillion yen in FY2026, or an increase of 22.3% over the FY2020 figure.

II. 2021 Forecast　　　　　　　　　　　　　　　　 　　　　　　　　　　　　　　　　　　

The total telecommunication equipment market figure for FY2021 is forecast at approximately 3.432 trillion yen (+4.0% year-over-year growth), with the domestic market accounting for 3.110 trillion yen (+2.6% year-over-year growth), and exports accounting for 322.4 billion yen (+19.7% year-over-year growth).

(1) Consumer equipment total: 1.938 trillion yen (+2.6% over FY2020)

• Despite concerns over longer replacement cycles and the shortage of semiconductors, the switch from 3G handsets and growth in 5G handset purchases are expected to fuel demand for mobile communication devices.
• Steady demand among older adults for cordless phones and personal facsimiles (including multi-functioning facsimiles) continues but will not be enough to reverse the overall downward trend. Value-added features include enhanced capacity for blocking unwanted telemarketing calls or assisting in identifying calls from scam artists.

(2) Enterprise equipment total: 402.5 billion yen (-3.3% over FY2020)

• Replacements are central to demand for key telephones, PBXs and office-use cordless phones and new workstyles accelerated by the COVID-19 pandemic and the shortage in semiconductors will continue to decrease demand.
• Overseas demand takes up a large share of office-use facsimiles (including multi-functioning facsimiles) and with the negative impact of COVID-19 on overseas economies, demand is forecast to continue shrinking.

(3) Infrastructure equipment total: 615.8 billion yen (+18.1% over FY2020)

• Installation of base stations and fixed communication equipment is expected to resume after postponement in FY2020 due to the COVID-19 pandemic. Investments to accommodate the surge in traffic from new life and workstyles as well as for 5G services will also fuel demand in this category.
• Demand for digital transmission equipment is forecast to revert to negative growth after increasing in FY2020 from nation-wide optic fiber cable networks laid down for the government’s GIGA (Global and Innovation Gateway for All) School Program to make high-speed networks available to every student.

(4) Internet equipment total: 326.4 billion yen (+0.6% over FY2020)

• The surge in traffic stemming from demand for large-volume contents, replacement demand for old equipment and changes in workstyle from the COVID-19 pandemic has translated into a demand increase, but supply limitations for LAN switches and optical access equipment due to the semiconductor shortage has led to a negative growth figure for the overall category.

(5) Equipment/parts categories not included above: 148.9 billion yen (-0.4% over FY2020)

III. Midterm Projection

The FY2026 total figure is projected at 4.362 trillion yen (+22.3% growth over FY2020), with the domestic market accounting for 3.696 trillion yen (+21.9% growth over FY2020) and exports accounting for 340.0 billion yen (+26.3% growth over FY2020).

(1) Consumer equipment total 2.409 trillion yen (+27.5% over FY2020)

• The domestic demand for mobile communication terminals is forecast to show significant growth with replacement of 3G handsets, new 5G service-compatible devices coming on the market – adding to the yen-value of the market, demand for non-contact systems with the spread of COVID-19 and popularity of IoT leading to greater use of IoT/M2M (Machine to Machine) modules – adding to the number of units for the category. However, lower unit prices for 5G handsets from FY2022 is expected to decrease the market value.
• The global mobile phone market (includes smartphones) is expected to record positive growth into FY2025. Global recovery from COVID-19 is projected in FY2021 and though semi-conductor shortages will negatively impact the latter half of FY2021, supply is seen to increase in FY2022. In addition, demand for 5G handsets, especially in developed countries, and continuing shifts from feature phones to smartphones among emerging markets resulted in the positive outlook. However, the maturing of emerging markets and price cuts in 5G handsets is expected to lead to a more tapered growth curve from FY2022. The sales revenue in FY2025 is projected at 435.6 billion U.S. dollars (CAGR +4.5%).
• Overall demand for cordless phones and personal facsimiles (including multi-functioning facsimiles) is forecast to continue declining with fewer fixed telephone lines and shrinking use of information dissemination using paper medium.

(2) Enterprise equipment total: 337.4 billion yen (-18.9% over FY2020)

• Key telephones, PBXs and office-use cordless phones are forecast to decline as the COVID-19 pandemic fast forwards workstyle transformation, with corporations rebuilding alternative voice communication platforms, such as cloud PBX and FMC services.
• The domestic market for office-use facsimiles (including multi-functioning facsimiles) will continue to decline as shifts to other communication channels such as e-mail result in less use and longer replacement cycles as well as workstyle innovations requiring less in-office work and thus, smaller office spaces.

(3) Infrastructure equipment total: 798.5 billion yen (+53.1% over FY2020)

• Demand for digital transmission equipment and terrestrial fixed communication devices will grow as networks are enhanced to accommodate the surge in traffic from 5G and IoT services, the popularity of heavy content streaming services, such as 4K/8K, as well as the robust demand for high speed & high-capacity data centers and disaster information systems.
• Exports are expected to climb in FY2021 and show healthy growth thereafter. This is partly due to telecom carriers abroad moving away from relying on single vendor procurement to reduce dependency risks.

(4) Internet equipment total: 342.0 billion yen (+5.4% over FY2020)

• Demand for routers, LAN switches and optical access equipment is forecast to grow. Underlying factors include rising traffic from 5G services, uptake in IoT/M2M, building new or expanding existing data centers and growth of high-speed services delivering data-heavy contents. Negative factors include lower unit/port prices from fierce price competition, virtualization using general-purpose hardware and replacement by 5G services, but these will be out-weighed by the embracing of DX brought about by workstyle innovations fueled by COVID-19.

(5) Equipment/parts categories not included above: 149.1 billion yen (-0.4% over FY2020)

IV. Market Trends and New Equipment/Services

(1) Summary

• Past mid-term demand forecasts focused on trends in telecom equipment for fixed & mobile phone networks, ISDN, private leased circuit and the internet.
• It will be necessary to look not only at telecom equipment-centric hardware, but also advances in optic and quantum technologies as well as software-centric aspects such as in cloud and virtualization technologies, which increasingly drive market trends.
• Widening the scope of the forecast is due largely to advances in virtualization technologies. In the past, dedicated telecom equipment was needed to provide telecom services and functions but advances in virtualization and the emergence of software to take on the same role with general-purpose equipment (mainly servers) has changed the landscape.
• Future forecasts will broaden its scope to capture trends of new equipment and services with growth potential, which will include general-purpose equipment for virtualization software systems.

(2) Examples of equipment and services to be covered

• Infrastructure/internet categories for both consumer and enterprise: terabit-level optical transmission equipment, virtual (cloud) base stations, edge data centers, satellite constellation, IoT solutions (autonomous driving, security, decarbonizing/carbon neutral), building virtualization platforms/operational support services, virtual routers/switches, solutions using quantum cryptography communication and AI.
• Consumer: personal xR devices (VR: virtual reality, AR: augmented reality, MR: mixed reality), consumer stationary mobile routers, home robots, home voice-response/network solutions.
• Enterprise: business-use xR devices (VR: virtual reality, AR: augmented reality, MR: mixed reality), business-use stationary mobile routers, business-use robots, business-use IoT/local 5G solutions (for factories, logistics, transportation, agriculture, lumber, fishery, etc.), unified communications/collaboration.
• Explain market trends for the above equipment and service categories.

[Forecasting methodology]

Domestic market forecasts are based on statistics compiled by CIAJ and interviews with CIAJ members, with the cooperation of InfoCom Research, Incorporated, for areas not covered by CIAJ.

Global ICT market forecasts and demand trends refer to and utilize data and analysis provided by a global research company Omdia with the cooperation of InfoCom Research, Incorporated.

The Communications and Information network Association of Japan (CIAJ) announces the telecommunication equipment production and trade figures for April through September, 2021 as follows.

I. Summary

In the Japanese economy during the six months between April and September 2021, private consumption, capital expenditure, and exports decreased due in part to the declaration of a state of emergency in response to the COVID-19 pandemic and the impact of a fall in production caused by a shortage of semiconductors. The annualized rate of real GDP growth (revised on December 8) for the July-September quarter was negative 3.6%, falling below zero for the first time in two quarters. Meanwhile, the telecom market began recovering from the weak demand and reduced business activities resulting from COVID-19. Demand for smartphones and communication infrastructure is growing in preparation for the 5G era, despite a decline in the production of certain models due to restrictions in parts supply.

(1) Domestic Market Trends

The domestic market value (domestic production value – export value + import value, excluding components) amounted to 1,463.4 billion yen in the April through September period, a year-on-year increase of 25.6%. This was a result partly of an increase in import of mobile phones.

(2) Domestic Production Trends

Domestic production totaled 224.0 billion yen in the April through September period, a year-on-year increase of 0.6%. Domestic production grew slightly thanks to an increase in investment in 5G base stations, offsetting a fall in production in reaction to the addition of networks in the previous year and the impact of a decrease in production caused by restrictions on parts supply.

(3) Export Trends

Export totaled 163.4 billion yen, a year-on-year increase of 9.9%, in April through September. This was the first increase since the second half of FY2017. Smartphone production in emerging countries in Asia began to recover and the export of components for smartphone production increased. Other models decreased due to sluggish overseas economies.

(4) Import Trends

In the April through September period, total imports amounted to 1,432.3 billion yen, a 27.8% increase year on year. Imports of mobile phones rose significantly from a fall in the previous year, thanks to an upward trend in domestic demand. Base stations and other data communication equipment (transmission equipment, communications equipment, modems, etc.) also increased.

II. Domestic Market Trends

(Aggregated by CIAJ based on Indices of Industrial Production and Trade Statistics of Japan)

(1) Detailed trends by category

Actual figures by category for FY2021 first half (H1) are as follows:

The size of the domestic market (including the value of imports of foreign brands) was calculated from government figures, the Indices of Industrial Production and Trade Statistics of Japan, according to the following formula: Domestic market size = value of domestic production – value of exports + value of imports.

1. Terminal equipment : 957.3 billion yen (+41.8％ over the same period of the previous year)

2. Network equipment : 506.1 billion yen (+3.2% over the same period of the previous year)

III. Domestic Production

(Aggregated by CIAJ based on Indices of Industrial Production compiled by the Ministry of Economics, Trade and Industry)

(1) Detailed trends by category

Actual figures by category for FY2021 first half (H1) are as follows:

1. Wireline terminal equipment

   16.7 billion yen (-19.2% over the same period of the previous year). Of this, telephone sets was 0.7 billion yen (-17.4% over the same period of the previous year), key telephones 6.8 billion yen (+2.8%), and intercoms 9.2 billion yen (-30.3%). While progress in vaccination is encouraging sales activities and businesses are beginning to recover from the impact of COVID-19, domestic production of products such as intercoms is decreasing due to a delay in parts supply.

2. Mobile terminal equipment

   67.8 billion yen (-10.4% over FY2020). Of which, mobile phones was 47.5 billion yen (-10.4% over the same period of the previous year). Domestic production of mobile phones and maritime and aeronautical mobile communications equipment also decreased with the impact of constraints such as limited parts supply.

3. Wireline network equipment

   64.9 billion yen (-11.1% over FY2020). Of this, central office switching systems and private branch exchanges (PBXs) totaled 10.2 billion yen (-14.9% year on year), digital transmission equipment was 30.0 billion yen (-8.1% year on year), and other transmission equipment was 24.7 billion yen (-12.8% year on year). Domestic production of PBXs continuously decreased in part due to changes in people’s working styles triggered by COVID-19 in addition to limited parts supply. Domestic production of digital transmission equipment decreased largely due to a reactionary fall from the special demand for the GIGA School Program in the previous year.

4. Wireless network equipment

   47.7 billion yen (+71.2% over the same period of the previous year). Of which, fixed telecommunication devices were 8.7 billion yen (-17.6% over the same period of the previous year) and base station equipment was 39.0 billion yen (+125.5% over the same period of the previous year). While domestic production of fixed communications equipment decreased due to sluggish demand for products for government offices, domestic production of base station communications equipment increased significantly thanks to the full-fledged construction of 5G communication infrastructure.

5. Network access equipment

   13.1 billion yen (-2.1% over the same period of the previous year) . Domestic production decreased primarily due to limited parts supply despite growth in demand for products for government offices and private-sector companies.

6. Wireline parts (relays and repeaters for wired equipment)

   13.8 billion yen (+14.5% over the same period of the previous year). Component production increased as export of components of smartphones manufactured overseas began to recover.

IV. Exports

(Compiled by CIAJ, based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures by category for FY2021 H1 are as follows:

1. Telephone sets and terminal equipment 9.1 billion yen (-3.2％ over the same period of the previous year).

   Of this, mobile phones were 6.8 billion yen (-8.1% over the same quarter of the previous year), cordless handsets for landline phones were 0.04 billion yen (-68.8% over the same period of the previous year), and other was 2.2 billion yen (+21.4% over the same period of the previous year). Products such as simple radio telecommunication devices included in the other category increased.

2. Network equipment 60.5 billion yen (+10.7％ over the same period of the previous year).

   Of which, base stations was 9.9 billion yen (+1215.2% over the same period of the previous year), data communication equipment was 49.2 billion yen (-5.9% over the same period of the previous year) and other network equipment was 1.4 billion yen (-12.5% over the same period of the previous year). Export of base stations to the U.S. significantly increased through global business deployment.

3. Parts (both wireline and wireless) 93.8 billion yen (+10.9％ over the same period of the previous year)

   Overseas smartphone production began to recover and export of components for smartphone production increased.

(2) Detailed trends by region

The results by region for the April-through-September period include 107.1 billion yen for Asia (+11.2% year on year), in which exports to China totaled 55.3 billion yen (+31.1% year on year).

North America was 38.5 billion yen (+21.1% over the same period of the previous year), of which the U.S. was 37.7 billion yen (+21.3% over the same period of the previous year).

Europe was 14.6 billion yen (-12.8% over the same period of the previous year), of which the EU was 10.8 billion yen (-3.7% over the same period of the previous year).

Export of components increased in line with the recovery of the Chinese economy. Export of base stations to the U.S. and Europe increased through global business deployment.

(3) Comparison and breakdown by region

V. Imports

(Compiled by CIAJ, based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures by category for FY2021 H1 are as follows:

1. Telephone sets and terminal equipment 881.9 billion yen (+50.0％ over the same period of the previous year).

   Of which, mobile phones was 877.3 billion yen (+50.7% over the same period of the previous year), cordless handsets for landline phones was 2.0 million yen (-11.5% over the same period of the previous year), and other was 2.6 million yen (-28.6% over the same period of the previous year). Import of mobile phones grew substantially year on year thanks to the gradual recovery of demand in contrast to the condition in the same period of the previous year and difference in the month of releasing new products of overseas smartphone manufacturers.

2. Network equipment 440.8 billion yen (+3.8％ over FY2020)

   This includes 49.8 billion yen for base stations (+32.7% over the same period of the previous year), 380.5 billion yen for data communication equipment (+0.7% over the same period of the previous year), and 10.6 billion yen for other network-related equipment (+11.5% over the same period of the previous year). Import of “other products (transmission equipment, communications equipment, modems, etc.)” in data communication equipment continued to increase due to capital expenditure for networks.

3. Parts (both wireline and wireless) 109.5 billion yen (+1.4％ over the same period of the previous year)

(2) Detailed trends by region

A breakdown of results for April through September by region shows that Asia was 1,363.5 billion yen (+30.6% over the same period of the previous year), of which China was 1,749.0 billion yen (+39.2% over the same period of the previous year). North America was 22.1 billion yen (-22.3% over the same period of the previous year), of which the U.S. accounted for 20.2 billion yen (-22.4% over the same period of the previous year). Europe was 30.5 billion yen (-1.6% over FY2020), of which the EU was 29.3 billion yen (-2.2% over FY2020). Import has been decreasing due to sluggish overseas production except an increase in the import of mobile phones.

(3) Comparison and breakdown by region

VI. Trends in Orders Received and Shipped

(1) Results for the first half of FY2021 (April through September 2021)

CIAJ statistics for total orders received and shipped in April through September amounted to 670.2 billion yen, representing a decrease of 1.5% year on year. This includes 530.7 billion yen for domestic shipments, which fell by 3.1% year on year, and 139.5 billion yen for exports, which dropped 23.3% year on year.

*Orders received and shipped by CIAJ member companies (domestic manufacturers) = value of domestic production + value of imports produced overseas = domestic shipment + export value

(2) Trends by category

Actual figures by category for FY2021 H1 are as follows:

1. Wireline terminal equipment 213.8 billion yen (-2.0％ over the same period of the previous year)

   Orders received and shipment of telephone sets, intercoms, and office-use cordless handsets began to recover from the impact of COVID-19, and domestic demand increased. Meanwhile, a recovery in personal facsimiles (include multifunction printers) and business facsimiles (including multifunction printers) slowed with the impact of parts shortages such as semiconductors on the supply side despite an upward trend in demand. As a result, wireline terminal equipment as a whole decreased year on year.

2. Mobile terminal equipment 197.1 billion yen (+0.5％ over the same period of the previous year)

   While demand for mobile phones began to recover thanks to an increase in purchasing opportunities, sales grew only slightly due to a fall in produce prices. Shipment of other mobile terminal equipment was sluggish both in Japan and abroad.

3. Wireline network equipment 89.9 billion yen (-18.9％ over the same period of the previous year).

   While demand for business equipment such as key telephones and private branch exchanges is beginning to recover along with progress in vaccination and an increase in sales activities, shipments have been decreasing due mainly to a delay in parts supply.
   Moreover, digital transmission equipment and PON/MC decreased in part due to a reactionary fall from the maintenance of optical cable networks across the country, including the GIGA School Program, in the previous year and shipment decreased in overall wired network equipment.

4. Wireless network equipment 133.7 billion yen (+25.7％ over the same period of the previous year).

   Demand for fixed communications equipment decreased in sectors other than export of terrestrial products and satellite products for the private sector. Fixed communications equipment increased significantly both in Japan and for export as investment in base station communications equipment for 5G mobile phones grew to full scale. Shipments of overall wireless network equipment increased year on year.

5. Other network equipment 17.3 billion yen (+4.8％ over the same period of the previous year).

   Demand for routers and LAN switches is growing as products for the private sector such as datacenters and for the public sector.

6. Communication equipment parts 18.5 billion yen (+46.1％ over the same period of the previous year)

I. Summary

In the April-June quarter of FY2021, the Japanese economy recorded an annualized quarter-over-quarter real GDP growth of 1.3% (first preliminary estimate released on August 16), turning positive after two quarters of negative growth. Private consumption also turned upward after two quarters due to recovering appetite for spending although consumption of services in the restaurant business remained weak, affected by people’s refraining from going out. Corporate capital expenditures increased as well, backed by steady corporate activities centered on major manufacturing companies which have seen strong exports to the U.S. and China that are on the way toward recovery from the COVID-19 pandemic.

Amid these circumstances, capital expenditures in the telecom market in the period from April through June 2021 were low for business-related devices such as key telephones and PBXs due to stagnant order receiving activities and installation work due to the deteriorated performance of small and medium-sized companies affected by the COVID-19 pandemic and the shortage of semiconductors. In addition, capital expenditures related to wireline network for the nationwide development of an optical cable network including the GIGA School Initiative have reached a certain phase of completion. However, demand for mobile phones, which decreased during the COVID-19 pandemic, began recovering due to newly released smartphones compatible with 5G (fifth-generation mobile communication systems) and sales promotion for the replacement of 3G models. Further, investment in base stations for the construction of 5G communications infrastructure continued to expand, while base station exports began and are increasing for the global business deployment of 5G.

(1) Domestic Market Trends

The value of the domestic market (value of domestic production – value of exports + value of imports; excluding parts) amounted to 755.0 billion yen in the April through June period, a year-on-year increase of 26.1%. This resulted from an increase in both the production and import of mobile phones and base stations, attributable to the advancing shift to 5G telecommunication.

(2) Domestic Production Trends

Domestic production totaled 114.3 billion yen in the April through June period, a year-on-year increase of 7.9%. Because demand for base stations for 5G communication has begun to increase in earnest, among other reasons, domestic production increased for three consecutive quarters.

(3) Export Trends

Total exports amounted to 82.6 billion yen for April through June, a year-on-year increase of 34.7％.

Exports to Asia, Europe and the U.S. were strong, in particular, demand for parts for the production of smartphone in China, of which production dropped sharply in the same quarter of the previous year, recovered to the level in the fourth quarter of FY2018.

(4) Import Trends

Total imports amounted to 737.6 billion yen in April through June, a year-on-year increase of 26.9％. Due to recovering domestic demand, demand for base stations and data communication equipment in addition to smartphones made by domestic and overseas manufacturers was strong, resulting in an increase for three consecutive quarters.

II. Domestic Market Trends

(Aggregated by CIAJ based on Indices of Industrial Production and Trade Statistics of Japan)

(1) Detailed trends by category

Actual figures for April through June by category are as follows. Due to the significant growth of terminal equipment and the continued steady performance of network equipment, an increase for three consecutive quarters was achieved.

1. Terminal equipment :
   497.4 billion yen (+33.6％ over the same period of the previous year)

2. Network equipment :
   257.6 billion yen (+13.7% over the same period of the previous year)

The size of the domestic market (including the value of imports of foreign brands) was calculated using the government figures in the Indices of Industrial Production and Trade Statistics of Japan, according to the following formula: Domestic market size = value of domestic production – value of exports + value of imports

III. Domestic Production

(Aggregated by CIAJ based on Indices of Industrial Production compiled by the Ministry of Economics, Trade and Industry)

(1) Detailed trends by category

Actual figures for April through June by category are as follows.

1. Wireline terminal equipment

   8.4 billion yen (-17.5% over the same quarter of the previous year). Of this, telephone sets was 0.4 billion yen (-4.4% over the same quarter of the previous year), key telephones 3.3 billion yen (+3.5%), and intercoms 4.7 billion yen (-28.3%). Because production of key telephones decreased due to the COVID-19 pandemic in the same quarter of the previous year, a year-on-year increase was posted. Equipment for small and medium-sized companies decreased reflecting restrained capital expenditures amid the COVID-19 pandemic, while equipment for telecommunications carriers increased due to demand for the updating of equipment. Production fell due to difficulty in the procurement of parts.

2. Mobile terminal equipment

   34.7 billion yen (-7.2% over the same quarter of the previous year). Of which, mobile phones were 25.1 billion yen (+5.4% over the same period of the previous year). Mobile phones increased partly due to measures to promote replacement from 3G equipment, but other land telecommunication devices including commercial radio terminals and maritime and aeronautical mobile communications equipment experienced a reactionary decrease due to replacement demand in the same quarter of the previous fiscal year. As a result, total production declined.

3. Wireline network equipment

   33.9 billion yen (+3.8% over the same quarter of the previous year). Of which, central office switching systems were 3.6 billion yen (+47.5% over the same quarter of the previous year), PBXs were 0.5 billion yen (-31.5% over the same quarter of the previous year), digital transmission equipment was 15.9 billion yen (+8.6% over the same quarter of the previous year) and other transmission equipment was 12.5 billion yen (-7.4% over the same quarter of the previous year). Demand for PBXs decreased because demand from small and medium-sized companies whose performances were hit by the pandemic were affected by the postponed upgrade of equipment and the deferred introduction of equipment, and also major companies reexamined their upgrade plans for work-style reforms and new communication styles. Further, the shortage of semiconductors impacted the receiving of orders. In central office switching systems, demand for the accommodation and conversion equipment that is necessary for the transition from public switched telephone networks to IP networks was maintained. Digital transmission equipment increased year on year as a reaction to a decline of production in the same quarter of the previous year due to the COVID-19 pandemic, but there was a demand decrease attributable to the somewhat settling capital expenditures for the increasing network volume due to teleworking and the nationwide development of an optical cable network for the GIGA School Initiative.

4. Wireless network equipment

   23.3 billion yen (+86.2% over the same quarter of the previous year). Of which, fixed telecommunication devices were 3.9 billion yen (-22.1% over the same quarter of the previous year) and base station equipment was 19.4 billion yen (+158.2% over the same quarter of the previous year). Exports of terrestrial fixed telecommunication devices increased, but because satellite fixed communication devices for government offices and the private sector significantly decreased, domestic production declined. Domestic production of base station communications equipment is increasing significantly for the construction of 5G communication infrastructure.

5. Network access equipment

   7.1 billion yen (+3.9% over the same quarter of the previous year). Routers for government offices and telecommunications carriers decreased, but both routers and LAN switches for the private sector were recovering from previously-restrained investment affected by the pandemic, while extended installation work was resumed. As a result, demand increased, leading to an increase in domestic production.

6. Wireline parts (relays and repeaters for wired equipment)

   6.9 billion yen (+8.8% over the same quarter of the previous year). Domestic production increased for two consecutive quarters because of a recovery in parts used in the production of smartphones, which are mainly exported to Asia.

IV. Exports

(Compiled by CIAJ, based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures for April through June by category are as follows.

1. Telephone sets and terminal equipment

   5.5 billion yen (-13.0％ over the same quarter of the previous year).
   Of this, mobile phones were 4.3 billion yen (-21.9% over the same quarter of the previous year), cordless handsets for landline phones were 0.04 billion yen (-44.4% over the same quarter of the previous year), and other was 1.2 billion yen (+55.1% over the same quarter of the previous year). Exports of simple radio telecommunication devices, among other products, included in the other category to the U.S. increased, reflecting a rise in stay-at-home demand.

2. Network equipment

   31.3 billion yen (+44.0％ over the same quarter of the previous year).
   Of this, base stations were 4.6 billion yen (+1,898.9% over the same quarter of the previous year), data communication equipment was 25.9 billion yen (+23.8% over the same quarter of the previous year) and other network equipment was 0.8 billion yen (+42.4% over the same quarter of the previous year). Demand expanded due to economic recovery in Asia, Europe and the U.S., causing exports to increase. Because of the global business deployment of 5G communication, exports of base stations to the U.S. significantly increased.

3. Parts (both wireline and wireless)

   45.7 billion yen (+37.6％ over the same period of the previous year).
   Due to recovering demand for parts for smartphone production, which dropped sharply in China in the same quarter of the previous year, exports of parts significantly increased year on year.

(2) Detailed trends by region

A breakdown of results for April through June by region shows that Asia was 54.5 billion yen (+53.0% over the same quarter of the previous year), of which China was 27.3 billion yen (+192.9% over the same quarter of the previous year). North America was 18.9 billion yen (+9.2% over the same quarter of the previous year), of which the U.S. was 18.6 billion yen (+8.6% over the same quarter of the previous year). Europe was 7.6 billion yen (+21.4% over the same quarter of the previous year), of which the EU was 5.8 billion yen (+24.9% over the same quarter of the previous year). Exports of parts for smartphone production to China and base stations for the U.S. significantly increased. Exports of mobile phones to the U.S. remained strong as well.

(3) Comparison and breakdown by region

V. Imports

(Compiled by CIAJ, based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures for April through June by category are as follows.

1. Telephone sets and terminal equipment

   459.8 billion yen (+38.9％ over the same period of the previous year).
   Of which, mobile phones were 457.5 billion yen (+39.3% over the same quarter of the previous year), cordless handsets for landline phones were 1.0 billion yen (+46.0% over the same quarter of the previous year) and other was 1.2 billion yen (-27.6% over the same quarter of the previous year). Due to recovering domestic demand, demand for and imports of personal equipment such as mobile phones and cordless handsets for landline phones expanded .

2. Network equipment

   224.6 billion yen (+14.4％ over the same quarter of the previous year).
   This includes 30.3 billion yen for base stations (+54.6% over the same quarter of the previous year), 188.8 billion yen for data communication equipment (+9.7% over the same quarter of the previous year), and 5.5 billion yen for other network-related equipment (+20.0% over the same quarter of the previous year). Of data communication equipment, switching and routing equipment was 75.9 billion yen (-18.9%) and other data communication equipment (including transmission devices, communication devices and modems) was 112.9 billion yen (+43.7%). Imports related to base stations for the development of 5G communication infrastructure increased significantly.

3. Parts (both wireline and wireless)

   53.3 billion yen (-1.3％ over the same period of the previous year)

(2) Detailed trends by region

A breakdown of results for April through June by region shows that Asia was 698.5 billion yen (+27.9% over the same quarter of the previous year), of which China was 567.4 billion yen (+39.5% over the same quarter of the previous year). North America was 11.2 billion yen (-19.3% over the same quarter of the previous year), of which the U.S. accounted for 10.3 billion yen (-22.4% over the same quarter of the previous year). Europe was 19.1 billion yen (+51.3% over the same quarter of the previous year), of which the EU was 18.4 billion yen (+51.2% over the same quarter of the previous year). In Asia, imports of base stations and other data communication devices, as well as mobile phones, increased. Europe recorded a significant rise in imports of base stations, and also showed an increase in other data communication devices and parts.

(3) Comparison and breakdown by region

VI. Trends in Orders Received and Shipped

(1) Actual figures in April through June 2021

Total orders received and shipped by Japan-based CIAJ member companies in April through June amounted to 333.3 billion yen, up 3.5% from the same quarter of the previous fiscal year. Of which the total value of domestic shipments totaled 254.0 billion yen, a decrease of 6.6% over the same quarter of the previous year) and exports was 79.3 billion yen, an increase of 58.2% over the same quarter of the previous year). Domestic shipment of wireline terminal equipment grew supported by stay-at-home demand, but the domestic shipment of network equipment excluding mobile base stations fell, resulting in a year-on-year decrease. On the other hand, exports increased reflecting a significant increase in demand mainly in the U.S. and China which were recovering from the COVID-19 pandemic, resulting in a year-on-year increase in the total amount of orders received and shipped.

*CIAJ Statistics for orders received and shipped = orders received and shipped by Japan-based CIAJ member companies
(=value of domestic shipments + value of exports = value of domestic production + value of imports of products produced overseas)

(2) Trends by category

Actual domestic shipments and exports by category in April through June were as follows:

1. Wireline terminal equipment

   109.2 billion yen (+18.0％ over the same quarter of the previous year).
   In the process of recovering from the COVID-19 pandemic, willingness to buy was increasing, including stay-at-home demand, resulting in a growth in demand for personal-use equipment such as cordless handsets for landline phones, intercoms, and personal-use facsimiles (including multifunctional machines). In particular, exports of personal-use facsimile machines significantly increased due to stay-at-home demand. In terms of business-use facsimile machines (including multifunctional machines), demand for non-hardware decreased because of an increase in teleworking due to a new wave of COVID-19 infections in Japan while demand for hardware increased. Exports also increased due to a drastic recovery of demand in China, Europe, and the U.S.

2. Mobile terminal equipment

   95.8 billion yen (-10.5％ over the same period of the previous year).
   The number of mobile phones shipped recovered to the level of two years ago due to the release of new 5G-compatible smartphone products and the promotion of replacement sales, while the amount of shipments decreased due to the lowered prices of 5G terminals and the expansion of low-end terminals for replacement sales .

3. Wireline network equipment

   42.8 billion yen (-20.8％ over the same quarter of the previous year).
   Demand for business-use equipment such as key telephones and PBXs weakened because of major customers’ postponement of equipment upgrades and suspension of equipment introduction. As the shortage of semiconductors has impacted orders received, it is assumed that the upgrade cycle will be prolonged. The amount of equipment exported recovered, but the amount of shipments decreased. Digital transmission equipment and PON/MC decreased because capital expenditures have been slowed .

4. Wireless network equipment

   68.7 billion yen (+23.3％ over the same quarter of the previous year).
   Demand for fixed telecommunication devices declined due to a significant decrease in satellite fixed telecommunication devices for government offices and the private sector. Domestic demand for and imports of base station communications equipment increased for the construction of 5G communication infrastructure, and exports also increased remarkably attributable to the global business deployment of 5G based on Open-RAN specifications.

5. Other network equipment

   7.3 billion yen (+7.1％ over the same quarter of the previous year).
   Demand for routers for government offices and telecommunications carriers decreased, while demand for routers and LAN switches for the private sector increased along a recovery from restrained investing due to the COVID-19 pandemic. However, it is assumed that there will be an impact from future waves of COVID-19 infections and decreased supply caused by the shortage of semiconductors.

6. Communication equipment parts

   9.6 billion yen (-57.5％ over the same quarter of the previous year)

The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment production and trade figures for FY2020 (April-March) as follows.

I. Summary

In FY2020, the Japanese economy recorded annual real GDP growth of minus 4.6% (first preliminary estimate released on May 18), the largest decline since the end of World War II, exceeding the decline (minus 3.6%) in FY2008 when the economy experienced the financial crisis led by the Lehman Brothers collapse. Private consumption related to the service industry declined following the declaration of a state of emergency, despite at-home consumption, and corporate capital expenditure was also sluggish partly due to a reactionary fall after picking up in the period from October through December 2020. As a result, the Japanese economy stalled. In contrast, exports were increasing following the economic recovery in the United States and China, where vaccinations were advancing.

In this environment, demand for capital expenditure continued to increase in the telecommunications equipment market in FY2020 even under the COVID-19 pandemic, in line with the construction of communications infrastructure for 5G (fifth-generation mobile communication systems) and the nationwide development of an optical cable network including the GIGA School Initiative. In addition, demand for mobile phones, which had been sluggish due to the impact of the COVID-19 pandemic, was also recovering. However, demand for business-related devices was sluggish due to the deterioration of corporate earnings and weak order activities installation work, reflecting restrictions on face-to-face sales.

(1) Domestic Market Trends

In FY2020, the total value of the domestic market (value of domestic production – value of exports + value of imports; excluding parts) stood at 3,013.9 billion yen, up 11.6% year over year. The major factor for this was an increase in imports of mobile phones, which account for the majority of the value of imports.

(2) Domestic Production Trends

The total value of domestic production in FY2020 was 520.7 billion yen, an increase of 5.6% over FY2019. Domestic production increased from the previous year for the first time in 14 years in FY2019 and rose year on year for the second consecutive year in FY2020 due to strong demand for digital transmission equipment for the nationwide development of optical cable networks and for base station communication equipment for 5G.

(3) Export Trends

The total figure for exports in FY2020 was 280.8 billion, a decrease of 8.6% over FY2019, falling for the third consecutive year. Parts exported for smartphones produced in Asia and China account for the majority of the value of exports, and demand for these parts declined for the third consecutive year, notwithstanding a recovery for the second consecutive quarter.

(4) Import Trends

The total figure for imports in FY2020 was 2,863.7 billion yen, an increase of 11.1% over FY2019, rising for the second consecutive quarter and for the first time in three years. Imports that include smartphones produced overseas by domestic and overseas manufacturers increased because demand for smartphones was recovering. In addition to imports for the development of 5G base stations, imports of all models increased.

II. Domestic Market Trends

(Aggregated by CIAJ based on Indices of Industrial Production and Trade Statistics of Japan)

(1) Detailed trends by category

Actual figures by category for FY2020 are as follows. The size of the domestic market exceeded 3 trillion yen for the first time in six years due to the strong performance of network equipment and the growth of terminal equipment.

1. Terminal equipment:1,951.8 billion yen (+7.0% over FY2019)

2. Network equipment:1,062.1 billion yen (+21.2% over FY2019)

The size of the domestic market (including the value of imports of foreign brands) was calculated from government figures, the Indices of Industrial Production and Trade Statistics of Japan, according to the following formula: Domestic market size = value of domestic production – value of exports + value of imports

III. Domestic Production

(Based on Indices of Industrial Production compiled by the Ministry of Economics, Trade and Industry)

(1) Detailed trends by category

Actual figures by category for FY2020 are as follows.

1. Wireline terminal equipment

   41.8 billion yen (-14.6% over FY2019). Of this, telephone sets were 1.9 billion yen (-4.0% over FY2019), key telephones 13.5 billion yen (-4.4% over FY2019), and intercoms 26.5 billion yen (-19.6% over FY2019). Domestic production declined because demand for intercoms for homes and key telephones for office buildings was weak given restrictions on face-to-face sales and installation work from the beginning of the fiscal year as a result of the COVID-19 pandemic.

2. Mobile terminal equipment

   175.3 billion yen (-0.4% over FY2019). Of which, mobile phones were 109.1 billion yen (+1.4% over FY2019). Mobile terminal equipment declined slightly overall as commercial radio terminals and other land telecommunication devices decreased as a backlash to special replacement demand in the previous fiscal year, despite the trend in the recovery of mobile phones produced in Japan and an increase in maritime and aeronautical mobile communications equipment.

3. Wireline network equipment

   161.2 billion yen (+20.0% over FY2019). Of which, central office switching systems was 16.3 billion yen (+81.8% over FY2019), PBXs was 3.2 billion yen (-42.0% over FY2019), digital transmission equipment was 67.6 billion yen (+38.5% over FY2019) and other transmission equipment was 66.5 billion yen (+4.1% over FY2019). PBXs were on a downward trend affected by the reduction of audio lines by cloud services and the consolidation of corporate bases given an increasing number of people working from home. Meanwhile, in central office switching systems, demand for accommodation and conversion equipment that is necessary for the transition from public switched telephone networks to IP networks increased. Domestic production of digital transmission equipment increased for the third consecutive year on strong investment in network equipment in response to increasing data traffic.

4. Wireless network equipment

   84.5 billion yen (+30.2% over FY2019). Of which, fixed telecommunication devices were 28.8 billion yen (-1.1% over FY0219) and base station equipment was 55.8 billion yen (+55.6% over FY2019). The domestic production of fixed communications equipment declined in both terrestrial and satellite fixed communication equipment on sluggish demand overseas, as well as fixed communication equipment for government offices, demand for which had run its course. Domestic production of base station communications equipment increased significantly for the construction of 5G communication infrastructure.

5. Network access equipment

   32.5 billion yen (-24.4% over FY2019). Domestic production of routers for telecommunications carriers was firm due to the need to strengthen network systems for commercial 5G services, but domestic production of LAN switches decreased given the slowdown in new construction of data centers caused by COVID-19, as well as falling demand due to the extension of installation work, despite a recovery in demand owing to the GIGA School Initiative.

6. Wireline parts (relays and repeaters for wired equipment)

   25.4 billion yen (-2.1% over FY2019). Domestic production declined year on year but showed a recovery trend quarter on quarter because parts used in the production of smartphones, which are exported to emerging countries in Asia, were recovering.

IV. Exports

(Compiled by CIAJ, based on based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures by category for FY2020 are as follows:

1. Telephone sets and terminal equipment

   18.6 billion yen (-15.1% over FY2019). Of this, mobile phones were 14.9 billion yen (-21.9% over FY2019), cordless handsets for landline phones were 0.25 billion yen (-5.1% over FY2019), and other was 3.5 billion yen (+35.0% over FY2019). Exports of convenience radio telecommunication devices, among other products, included in the other category to the U.S. increased, reflecting a rise in stay-at-home demand.

2. Network equipment

   103.5 billion yen (-16.2% over FY2019). Of this, base stations were 1.2 billion yen (-53.5% over FY2019), data communication equipment was 99.5 billion yen (-15.1% over FY2019) and other network equipment was 2.8 billion yen (-24.4% over FY2019). Demand continued to decline, mainly reflecting the impact of lockdowns due to the COVID-19 pandemic.

3. Parts (both wireline and wireless)

   158.7 billion yen (-2.0% over FY2019). Exports, while declining year on year, were recovering on a quarterly basis due to a recovery in demand for parts used in the production of smartphones

(2) Detailed trends by region

A breakdown of results for FY2020 by region shows that Asia was 178.3 billion yen (-3.4% over FY2019), of which China was 66.3 billion yen (+10.4% over FY2019). North America was 63.9 billion yen (-9.1% over FY2019), of which the U.S. was 62.7 billion yen (-9.7% over FY2019). Europe was 31.1 billion yen (-24.4% over FY2019), of which the EU was 22.6 billion yen (-33.0% over FY2019).

A breakdown of results for FY2020 by region shows that Asia was 178.3 billion yen (-3.4% over FY2019), of which China was 66.3 billion yen (+10.4% over FY2019). North America was 63.9 billion yen (-9.1% over FY2019), of which the U.S. was 62.7 billion yen (-9.7% over FY2019). Europe was 31.1 billion yen (-24.4% over FY2019), of which the EU was 22.6 billion yen (-33.0% over FY2019).

(3) Comparison and breakdown by regions

V. Imports

(Compiled by CIAJ, based on based on Ministry of Finance’s “Trade Statistics”)

(1) Detailed trends by category

Actual figures by category for FY2020 are as follows. Imports were up year on year in all categories.

1. Telephone sets and terminal equipment

   1,753.3 billion yen (+8.1% over FY2019). Of this, mobile phones were 1,741.6 billion yen (+8.2% over FY2019), cordless handsets for landline phones were 4.7 billion yen (+4.1% over FY2019) and other was 7.0 billion yen (+1.2% over FY2019). Imports of mobile phones including those produced overseas by domestic and overseas manufacturers increased, reflecting a recovery in demand for smartphones that took place in the second half of FY2020.

2. Network equipment

   887.4 billion yen (+17.1% over FY2019). Of this, base stations were 93.7 billion yen (+50.2% over FY2019), data communication equipment was 769.6 billion yen (+13.8% over FY2019) and other network equipment was 24.1 billion yen (+28.9% over FY2019). Of data communication equipment, switching and routing equipment was 376.6 billion yen (+1.9% over FY2019) and other data communication equipment (including transmission devices, communication devices and modems) was 393.0 billion yen (+28.0% over FY2019). Imports related to base stations and transmission devices, among other products, for the development of mobile phone infrastructure increased significantly.

3. Parts (both wireline and wireless)

   223.0 billion yen (+11.8% over FY2019).

(2) Detailed trends by region

A breakdown of results for FY2020 by region shows that Asia was 2,709.8 billion yen (+12.3% over FY2019), of which China was 2,091.1 billion yen (+10.0% over FY2019). North America was 53.3 billion yen (-22.3% over FY2019), of which the U.S. was 47.5 billion yen (-26.7% over FY2019). Europe was 66.0 billion yen (+31.3% over FY2019), of which the EU was 63.5 billion yen (+30.3% over FY2019).

In Asia, imports of base stations and other data communication devices, as well as mobile phones, increased year on year. Europe reflected a rise in imports of base stations, other data communication devices, and parts.

(3) Comparison and breakdown by region

VI. Trends in Orders Received and Shipped

(1) FY2020 actual

Total orders received and shipped by Japan-based CIAJ member companies in FY2020 amounted to 1,435.5 billion yen, down 4.4% from FY2019. Of this, the total value of domestic shipments was 1,180.9 billion yen, a decrease of 2.3% over FY2019. The total value of exports was 254.6 billion yen, a fall of 12.9% over FY2019.

Domestic shipments decreased year on year due to a decline in shipments of terminal equipment, such as mobile phones and fax machines, the values of orders and shipments for which are large, although shipments of network equipment increased.

*CIAJ statistics for orders received and shipped = orders received and shipped by Japan-based CIAJ member companies (= value of domestic shipments + value of exports = value of domestic production + value of imports for products produced overseas)

(2) Trends by category

Actual domestic shipments and exports by category for FY2020 were as follows:

1. Wireline terminal equipment

   474.3 billion yen (-10.8% over FY2019). Demand for telephones, intercoms and office-use cordless handsets for landline phones, among other devices, remained weak due to the impact of the COVID-19 pandemic. Overall shipments of wireline terminal equipment decreased year on year as exports of mainstay business-use facsimiles (including multifunctional machines) for overseas customers declined, reflecting the promotion of teleworking amid lockdowns, coupled with a fall in domestic demand, which also applied to personal-use facsimiles (including multifunctional machines). On the other hand, exports of personal-use facsimiles (including multifunctional machines) rose, reflecting stay-at-home demand.

2. Mobile terminal equipment

   422.5 billion yen (-6.8% over FY2019). The number of mobile phones shipped increased. However, the value of shipments decreased, reflecting a fall in unit prices due to a shift from high-end to mid-range models. Of mobile phones, however, there was an increase in both the number of smartphones shipped and the value of their shipments. In addition, shipments of other mobile terminal devices decreased, resulting in a year-on-year fall in overall shipments and exports of mobile terminal equipment.

3. Wireline network equipment

   232.7 billion yen (+9.4% over FY2019). Domestic demand for business-use equipment such as key telephones and PBXs, while recovering partly due to the restart of capital investments, fell on a full-year basis. Exports also declined significantly. On the other hand, shipments for wireline network equipment overall increased year on year thanks to continued strength in demand for digital transmission equipment (exports declined), as well as a rise in demand for PON/MC in Japan.

4. Wireless network equipment

   244.1 billion yen (+5.6% over FY2019). Demand for fixed terrestrial communication equipment for government offices and private sectors and fixed satellite communication equipment for government offices decreased in reaction to a significant rise that had occurred in the previous year. On the other hand, demand for base station communication equipment used for mobile phones grew steadily for the launch of 5G commercial services. As a result, overall shipments and exports of mobile network equipment rose year on year.

5. Other network equipment

   34.7 billion yen (-22.0% over FY2019). Demand for routers for telecommunications carriers remained strong due to the strengthening of network systems for the launch of 5G commercial services. However, demand for LAN switches fell sharply due to the COVID-19 pandemic. Consequently, overall shipments and exports of other network equipment declined year on year.

6. Communication equipment parts

   27.3 billion yen (-0.4％ year on year).