The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment and trade figures for April through December, 2017 as follows.

Japan’s GDP during October through December 2017 grew YoY (year-over-year) at an annual rate of 1.6%, the 8^th consecutive positive quarterly growth, according to the second preliminary figures announced by the Cabinet Office on March 8th. The number was sustained by growth in consumer spending for cellular phones and on eating out, as well as increased capital spending by enterprises in such areas as production machinery. Healthy performance among businesses overall and economic growth abroad are also expected to contribute to a continuation of the gradual recovery.

However, in the telecom market, capital investments in business-related equipment and network equipment remained sluggish, with continuing relocation of manufacturing overseas, leading to the second consecutive decline in domestic production of telecom equipment (combined Q1 through Q3). On the other hand, exports recorded a second consecutive positive growth (combined Q1 through Q3), with the uptake in demand for smartphone parts. There was a significant spike in the third quarter in imports, with positive growth in all categories, but especially robust demand for both domestic as well as foreign brand smartphones, pushing the combined Q1 through Q3 figure into positive growth.

I. Domestic Production

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

(1) FY2017 Q1 through Q3 actual

The total value of production as of the end of Q3 was 367.1 billion yen, or negative 15.4% growth over the same period in FY2016. The recovery in domestic consumer spending (including smartphone purchases) was not enough to offset the decline in capital spending for office equipment as well as wireline and radio network equipment.

(2) Trend by categories

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

1. Wireline terminal equipment: 43.1 billion yen (-7.8% over the same period of the previous year). Of which telephone sets was 2.4 billion yen (-3.6% over the same period of the previous year) and key telephones 16.7 billion yen (-14.1% over the same period of the previous year), intercoms 23.1 billion yen (-3.1% over the same period of the previous year) and facsimiles 900 million yen (-6.8% over the same period of the previous year). On the other hand, the influx of imports rose in cordless phones (4.5 billion yen: +19.1% over the same period of the previous year) and facsimiles (3.9 billion yen: +4.3% over the same period of the previous year).
2. Mobile terminal equipment: 115.9 billion yen (-20.4% over the same period of the previous year). Of which mobile phones was 79.7 billion yen (-21.5% over the same period of the previous year) and public-use PHS 1.1 billion yen (+21.5% over the same period of the previous year). Smartphone demand was healthy with upgrades from older or clamshell models, but domestic production continues to decline. On the other hand, the influx of imports rose in cellular phones (1.469 trillion yen: +16.6% over the same period of the previous year).
3. Wireline network equipment: 89.0 billion yen (-12.7% over the same period of the previous year). Of which central office switching systems was 3.7 billion yen (-42.5% over the same period of the previous year), PBX was 9.8 billion yen (-17.9% over the same period of the previous year) and digital transmission equipment was 28.4 billion yen (-18.1% over the same period of the previous year) and other transmission equipment was 43.1 billion yen (-1.0% over the same period of the previous year). Demand for key telephones and PBXs, originally expected in FY2017, is foreseen to pick up with the supply of large to medium scale office buildings gets built behind schedule in FY2018 or later in time for 2020. However, smaller systems and lower unit costs will push overall yen value of demand figures lower.
4. Wireless network equipment: 69.7 billion yen (-27.5% over the same period of the previous year). Of which fixed telecommunication devices was 24.2 billion yen (-9.1% over the same period of the previous year) and base station equipment was 45.5 billion yen (-34.5% over the same period of the previous year). The end to the investment cycle for higher speeds resulted in the drop in base stations.
5. Network access equipment: 28.3 billion yen (+19.5% over the same period of the previous year). Compared to FY2016, which had low demand, the numbers show positive growth.
6. Wireline parts: 21.1 billion yen (+5.9% over the same period of the previous year). Healthy production of new advanced feature models for Japanese, U.S. and Korean brands resulted in the 6th consecutive positive growth.

II. Exports

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

(1) FY2017 Q1 through Q3 actual

The total figure for exports from April through December was 443.0 billion yen (+27.0% over the same period of the previous year), reflecting healthy growth of overseas economies. Exports of telephone sets and terminal equipment increased with growth in U.S. demand for cell phones from FY2017. In network equipment, the end to the recent cycle of global investments in LTE led to the large drop in base stations. There was no significant change in data communication equipment demand. Increased production of high-end terminal equipment by both domestic as well as foreign brands in their overseas production sites kept demand for parts at a healthy level.

(2) Trend by categories

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

1. Telephone sets and terminal equipment 13.7 billion yen (+346.8% over the same period of the previous year)

   Of which, mobile phones was 11.5 billion yen (+1,025.1% over the same period of the previous year), facsimiles was 100 million yen (-45.3% over the same period of the previous year), cordless handsets for landline phones was 300 million yen (+67.2% over the same period of the previous year) and other was 1.8 billion yen (+2.8% over the same period of the previous year).

2. Network equipment 109.1 billion yen (-4.0% over the same period of the previous year)

   Of which, base stations was 5.1 billion yen (-45.9% over the same period of the previous year), data communication equipment was 99.9 billion yen (-0.9% over the same period of the previous year) and other network equipment was 4.2 billion yen (+17.8% over the same period of the previous year).

3. Parts (both wireline and wireless) 320.2 billion yen (+37.9% over the same period of the previous year)

(3) Actual figures by region (April through December)

By region, Asia was 346.3 billion yen (+32.0% over the same period of the previous year), of which China was 181.0 billion yen (+13.0% over the same period of the previous year). North America was 54.2 billion yen (+15.0% over the same period of the previous year), of which the U.S. was 53.4 billion yen (+15.7% over the same period of the previous year). Europe was 30.8 billion yen (+9.8% over the same period of the previous year), of which the EU was 27.3 billion yen (+7.7% over the same period of the previous year). Among the export of parts, China accounted for 70.5% in FY2015 and 60.3% in FY2016, and this decreased to 50.9% in the April through December 2017 period, reflecting the shift in production of smartphones to Asian countries other than China. Exports of mobile phones to the U.S. continue to increase and amounted to 8.9 billion yen (+8,448.4% over the same period of the previous year)

(4) Comparison and breakdown by regions

III. Imports

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

(1) FY2017 Q1 through Q3 actual

Healthy domestic demand for smartphones pushed the total figure for exports from April through December to 2.235 trillion yen (+15.7% over the same period of the previous year). In mobile phones, the usual spike in new smartphone shipments from China to the U.S. in the September through October timeframe occurred a month late from October through November. This meant a large drop in Q2 figures and a recovery in Q3. In base stations, the recent round of domestic demand for LTE slowed to push Q3 figures into the negative for the first time in seven quarters.

(2) Trend by categories

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

1. Telephone sets and terminal equipment 1.482 trillion yen (+16.5% over the same period of the previous year)

   Of which, mobile phones was 1.469 trillion yen (+16.6% over the same period of the previous year), facsimiles was 3.9 billion yen (+4.3% over the same period of the previous year), cordless handsets for landline phones was 4.5 billion yen (+19.1% over the same period of the previous year) and other was 4.9 billion yen (-0.2% over the same period of the previous year).

2. Network equipment 505.6 billion yen (+15.2% over the same period of the previous year)

   Of which, base stations was 33.2 billion yen (+28.5% over the same period of the previous year), data communication equipment was 457.8 billion yen (+14.4% over the same period of the previous year) and other network equipment was 14.7 billion yen (+12.9% over the same period of the previous year).

3. Parts (both wireline and wireless) 246.7 billion yen (+12.0% over the same period of the previous year)

(3) Actual figures by region (April through December)

By region, Asia was 2.125 trillion yen (+16.4% over the same period of the previous year), of which China was 1.704 trillion yen (+8.7% over the same period of the previous year). North America was 58.2 billion yen (+10.5% over the same period of the previous year), of which the U.S. accounted for 57.0 billion yen (+12.2% over the same period of the previous year). Europe was 25.8 billion yen (+1.6% over the same period of the previous year), of which the EU was 25.0 billion yen (+0.6% over the same period of the previous year).

(4) Comparison and breakdown by regions

IV. Trends in Orders Received and Shipped

(from CIAJ statistics)

(1) FY2017 Q1 through Q3 actual

CIAJ statistics for total orders received and shipped for the period amounted to 1.307 trillion yen (-0.5% over the same period of the previous year). Of which the total value of domestic shipments was 1.003 trillion yen (-3.5% over the same period of the previous year) and exports was 304.1 billion yen (+10.6% over the same period of the previous year).

(2) Trend by categories

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

1. Wireline terminal equipment: 474.1 billion yen (+4.1% over the same period of the previous year).

   Personal-use multi-functioning facsimiles, office-use facsimiles for the domestic market and office-use multi-functioning facsimiles for overseas markets all showed healthy growth. Intercoms also contributed to the overall positive growth.

2. Mobile terminal equipment: 475.8 billion yen (+10.9% over the same period of the previous year).

   In mobile phones, smartphone demand was healthy, with upgrades from older or feature phones, contributing to the significant uptake.

3. Wireline network equipment: 102.7 billion yen (-14.2% over the same period of the previous year).

   Demand for PONs, modems and WDM transmission equipment continued to exceed previous year figures, but the category as a whole declined.

4. Wireless network equipment: 193.5 billion yen (-22.3% over the same period of the previous year).

   Exports of terrestrial communication equipment and domestic demand for satellite communication equipment (due to Japanese satellite launches) recorded positive growth. However, the end to the investment cycle for LTE resulted in the drop in base stations, continuing the negative growth for the overall category.

5. Other network equipment: 29.1 billion yen (-3.8% over the same period of the previous year).

   Routers recorded negative growth, while LAN switches showed positive growth.

6. Telecommunication equipment parts: 32.2 billion yen (+4.0% over the same period of the previous year).

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

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CIAJ
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The Communications and Information network Association of Japan (CIAJ), a general incorporated association, released its “Mid-Term Demand Forecast for Telecommunication Equipment,” covering FY2017 through FY2022. Reflecting the ever increasing importance of global markets, global flow figures (Out-Out, Out-In) were added to actual figures and figures are grouped first into equipment categories before indicating domestic and global markets. These changes will allow for more detailed analysis of changes in domestic and global markets for both actual and forecast figures.

The telecommunication market witnessed longer replacement cycles of mobile phones, while rapid penetration of smartphones came with a spike in traffic, leading to increased investment in radio and wireline network equipment, but the investment cycle subsided in FY2016. However, the overall economic recovery from the latter half of FY2016 and the pursuing rise in demand is expected to result in positive growth for FY2017. Although the market is foreseen to shrink temporarily as Japan goes through economic and social restructuring, it is expected to gradually pick up again through FY2022. Positive forces include efforts to increase productivity to cover for labor shortages, simplifying workplaces to make it more friendly for older workers, increased services and products utilizing IoT and AI, as well as demand related to 5G and autonomous driving technologies.

I. Outline

The Japanese economy in first half of FY2016 observed a stronger yen and a slowdown among emerging markets, but their impact dwindled in the latter half. Helped by stronger consumer spending, especially for mobile phones and clothing, and signs of recovering exports and capital spending among businesses, actual GDP recorded the second consecutive growth at 1.3%. Lower replacement demand for mobile phones, which makes up a large portion of overall demand, a reluctance among businesses to make capital investments in enterprise equipment and networks facilities from the slowdown among emerging markets contributed to the negative growth. The total telecommunication equipment market figure for FY2016 was 3.537 trillion yen, or a year-over-year negative growth of -4.2%. Positive growth was recorded in the 4 categories, including fixed communication equipment, LAN switches and cordless telephones.

As Japan continues to undergo gradual recovery in FY2017, the outlook for real GDP is 1.6% (the average of figures announced by 9 private sector research institutions as of November). Growth in consumer spending and corporate capital investments in networks and enterprise equipment have led to the CIAJ forecast for telecommunication equipment demand in FY2017 of 3.651 trillion yen or a positive year-over-year growth of 3.2%. Seven equipment categories are forecast to record positive growth, including mobile terminals (for public network use), office-use multi-functioning facsimiles, fixed communication equipment, multi-functioning personal facsimiles, optical access equipment and base station equipment.

New demand creation is forecast from FY2018 onwards, the total market value in FY2022 is forecast at approximately 3.644 trillion yen, an increase of 1.1% over FY2021, or a 3.0%growth over the FY2016 figure. The 6 equipment categories forecast to record positive growth over FY2016 include base station equipment, mobile terminals (for public network use), fixed communication equipment, digital transmission equipment and optical access equipment.

II. Actual Figures (Chapter 2)

The total telecommunication equipment market figure for FY2016 was 3.537 trillion yen (-4.2% year-over-year growth), with the domestic market accounting for 3.125 trillion yen (-4.1% year-over-year growth), and exports accounting for 411.2 billion yen (-4.4% year-over-year growth).

(1) Consumer equipment total: 1.894 trillion yen (-5.1% year-over-year growth) (includes public-use PHS)

With the global market for mobile phones (including smartphones) levelling off, the actual figure for FY2016 was approximately 37.470 trillion yen (-15.4% year-over-year growth), or 344.389 billion U.S. dollars (-6.6% year-over-year growth).

The domestic market also decreased, with longer replacement cycles, leading to the FY2016 domestic mobile terminal figure (total of smartphones, feature phones, mobile wi-fi routers, M2M modules) of 1.797 trillion yen (-4.3% year-over-year growth), with exports amounting to 40 billion yen (-26.7% year-over-year growth).

A flow analysis of FY2016 figures was conducted to better grasp global production and shipment activities of Japanese companies. Total production overseas by Japanese companies amounted to 1.232 trillion yen, or 89% of the total production figure of 1.382 trillion yen, of which 815.8 billion yen was overseas production and overseas shipments (Out-Out). Although shipments to developed countries, such as Europe and North America were flat, Out-Out figures for high-end products were robust.

The FY2016 domestic figure for cordless phones, personal facsimiles and multi-functioning personal facsimiles was 30.1 billion yen (-7.7% year-over-year growth), while exports was 25.8 billion yen (-8.2% year-over-year growth).

(2) Enterprise equipment total: 527.6 billion yen (-2.5% year-over-year growth)

Shrinking demand for fixed telephone services and longer replacement cycles as voice traffic decreases contributed to the FY2016 domestic figure of 78.3 billion yen (-4.7% year-over-year growth) and 31.6 billion yen (-3.4% year-over-year growth) export figure for key telephones, PBXs and office-use cordless phones.

The increasing shift from single function to multi-function devices led to the FY2016 domestic figure of 206.6 billion yen (-2.6% year-over-year growth) and 211.1 billion yen (-1.5% year-over-year growth) export figure for office-use facsimiles and office-use multi-functioning facsimiles.

(3) Infrastructure equipment total: 654.9 billion yen (-3.5% year-over-year growth)

The global market for digital transmission equipment in FY2016 was 1.474 trillion yen (-1.7% year-over-year growth), which in U.S. dollars was 13.5 billion (+8.5% year-over-year growth), due to the 9.4% rise in currency exchange rate. This growth was to cover rising traffic.

In the domestic market, the completion in the round of investments by telecom carriers in fixed lines and mobile backhaul systems led to a drop to 58.5 billion yen (-10.2% year-over-year growth) and an even steeper drop in exports of 19.9 billion yen (-30.7% year-over-year growth) due to fierce price wars and slower economies abroad.

Flow analysis of actual FY2016 figures for Japanese companies showed a reversal to negative growth in Out-Out figures, amounting to 31.9 billion yen.

With the end to the latest capital investments by carriers, the FY2016 domestic figure for central office switching systems, fixed communication equipment and base station equipment was 537.9 billion yen (-2.6% year-over-year growth), and exports was 38.6 billion (+16.6% year-over-year growth).

(4) Internet equipment total: 290.9 billion yen (-1.7% year-over-year growth)

The global router market for telecom carriers in FY2016 was 1.334 trillion yen (-7.8% year-over-year growth), but in U.S. dollars was 12.258 billion (+1.8% year-over-year growth). These numbers reflect the growing investments in infrastructure among emerging countries and efforts to accommodate rising traffic among developed countries. The global market for enterprise–use routers was 406.1 billion yen (-9.8% year-over-year growth). In U.S. dollar base, the figure was basically flat at 3.732 billion yen (-0.5% year-over-year growth), indicating growing demand among emerging countries on one hand, while unit prices slid lower on the other.

On the other hand, the domestic market (carriers + enterprise) was 106.5 billion yen (-5.0% year-over-year growth). The most recent round of investments in providing FTTH services to remote areas and measures to accommodate rising traffic from the popularity of smartphones have subsided, pulling the figure downwards for the carrier market. Businesses and the public sector have been increasingly embracing smartphones and other mobile devices and strengthening their networks to accommodate the surge in traffic, resulting in a relatively unchanged number of devices shipped, but the drop in unit price per port caused the yen figure to drop below the previous year.

Investments in optical fiber and accommodation of mobile data traffic seems to have slowed, with the domestic market for LAN switches and optical access equipment in FY2016 amounting to 184.0 billion yen (+0.4% year-over-year growth). The value of exports was 400 million yen (-20.0% year-over-year growth).

The FY2016 total for equipment/parts categories not included above was 169.5 billion yen (-4.6% year-over-year growth)

III. Forecast Figures (Chapter 3)

[1] FY2017 Forecast

The total telecommunication equipment market figure for FY2017 is forecast at 3.651 trillion yen (+3.2% year-over-year growth), with the domestic market accounting for 3.165 trillion yen (+1.3% year-over-year growth), and exports accounting for 485.9 billion yen (+18.2% year-over-year growth).

(1) Consumer equipment total: 1.963 trillion yen (+3.7% year-over-year growth)

A rebound from the tightening regulation over extreme discounts on terminals in 2016 is expected for mobile terminals (for public network use). The value of shipments for the domestic market in FY2017 is forecast to indicate +4.0% year-over growth, while exports decrease by 14.9%. Moderate demand for cordless phones, personal facsimiles and multi-functioning personal facsimiles are expected among older adults, with additional features keeping prices relatively stable, but as frequency of use and replacement cycles becoming fewer and longer, the number of units and total value of shipments are expected to show a gradual decline. FY2017 figure for the domestic market is expected to decline by 3.7%, while exports grow by 20.0%.

(2) Enterprise equipment total: 560.1 billion yen (+6.2% year-over-year growth)

Replacements are central to demand for key telephones, PBXs and office-use cordless phones. The forecast for the FY2017 domestic market is -10.3%, with exports -1.4%. The migration from simple office-use facsimiles to multi-functioning facsimiles continues, with multi-functioning facsimiles making up the bulk of exports. The FY2017 domestic market is expected to decline by -4.8%, while exports are forecast to grow by +24.2%.

(3) Infrastructure equipment total: 667.6 billion yen (+1.9% year-over-year growth)

Demand for base stations and fixed communication equipment is expected to grow as economic recovery is seen overseas. The domestic market value for central office switching systems, digital transmission equipment, fixed communication equipment and base stations in FY2017 is expected to decline -1.8%, while exports grow by 40.4%

(4) Internet equipment total: 292.6 billion yen (+0.6% year-over-year growth)

The domestic market for routers, LAN switches and optical access equipment is greatly swayed by investment plans of the telecom carriers and is expected to grow by +0.6% in FY2017 and exports grow by +15.3.

The FY2017 total for equipment/parts categories not included above is expected to be 168.0 billion yen (-0.9% year-over-year growth)

[2] Midterm Projection

The FY2022 total figure is projected at 3.644 trillion yen (+3.0% growth over FY2016), with the domestic market accounting for 3.212 trillion yen (+2.8% growth over FY2016) and exports accounting for 431.5 billion yen (+4.9% growth over FY2015).

(1) Consumer equipment total: 1.917 trillion yen (+1.2% over FY2016)

The global mobile phone market (includes smartphones) is expected to continue growing, mainly from low-end smartphone demand among emerging markets. Looking at the breakdown by communication format, 5G devices will start making its mark around 2020 (diagram 1), and sales revenue in FY2021 is projected at 394.7 billion U.S. dollars (CAGR 2.8%).

The domestic market from FY2017 onwards will see longer replacement cycles for mobile phones, and muffled growth as measures to control the shift from MNO to MVNO take effect. However, SIM-free smart phones are expected to become popular, especially among MVNO subscribers, resulting in a basically flat outlook. From 2020 onwards, the promotion of new 5G devices should have a positive impact on the market. The total value of the domestic market in FY2022 for mobile communication devices (smart phones, feature phones, mobile wi-fi routers and M2M modules) is projected at 1.856 trillion yen (+3.3% growth over FY2016, see diagram 2), with exports at 15.2 billion yen (-62.0% growth over FY2016)

Some additional features making it more difficult for scam artists and unwanted callers from getting through to subscribers will keep prices for some cordless phones, personal facsimiles and multi-functioning personal facsimiles, but overall demand is expected to shrink. The total value of the domestic market in FY2022 is projected at 21.1 billion yen (-30.0% growth over FY2016), with exports at 24.9 billion yen (-3.3% growth over FY2016).

(2) Enterprise equipment total: 505.5 billion yen (-4.2% over FY2016)

In key telephones, PBXs and office-use cordless phones, new demand for nursing care facilities and accommodations for foreign tourists will not be enough to overcome negative factors, which will include longer replacement cycles, use of voice-mail in the cloud services and replacement of devices by software. The total value of the domestic market in FY2022 is projected at 61.7 billion yen (-10.1% growth over FY2016), with exports at 30.3 billion yen (-4.0% growth over FY2016). Demand and usage of simple office-use facsimiles will shrink even further, but pressure to capture the replacement demand for smaller, multifunctioning document-handling devices with advanced color functions should result in lower prices. All in all, the total value of the domestic market for simple office-use facsimile and multi-functioning facsimile category in FY2022 is projected at 172.1 billion yen (-16.7% growth over FY2016), with exports at 241.5 billion yen (+14.4% growth over FY2016).

(3) Infrastructure equipment total: 758.6 billion yen (+15.8% over FY2016)

Accommodating rise in traffic, investments in data centers and 5G have led to the projection for the global market for digital transmission equipment of 16.286 billion U.S. dollars in sales revenue (CAGR 3.8%).

Similar enhancements in domestic networks as well as emerging services for 4K/8K contents are expected to raise the domestic market value to 66.9 billion yen (+14.4% growth over FY2016). Exports are projected to shrink to 17.8 billion yen (-10.5% growth over FY2016), due to fierce price wars.

The figure for central office switching systems will be dependent on maintenance investment fluctuations. Fixed communication equipment figures will grow with investments in disaster prevention measures, backhaul demand and satellite launches. Investments towards 5G will lead to the domestic market value of base stations in FY2022 to become 623.1 billion yen (+15.8% growth over FY2016) and exports to grow to 50.8 billion yen (+31.6% growth over FY2016).

(4) Internet equipment total: 289.0 billion yen (-0.7% over FY2016)

The global demand for routers among telecom carriers in emerging countries to enhance their infrastructure have led to the projection of 13.193 billion U.S. dollars (CAGR 1.5%), with the global market for routers targeting enterprise use growing in number of units as IoT platforms are built, but remain basically flat in value, as price per unit drops at 4.033billion U.S. dollars (CAGR 1.6%).

In the domestic market, telecom carriers are expected to make further investments in their facilities, such as data centers, and switch to more energy-saving equipment, so the number of units will rise, but the pressure to lower prices will also continue. There is also a trend to realize router functions with virtual technologies on standard servers, contributing to the FY2022 projection for the domestic market value of 103.3 billion yen (-3.0% growth over FY2016).

LAN switches and optical access equipment markets will remain flat due to drops in price per unit, with the domestic market value projected at 184.6 billion yen (+0.3% growth over FY2016) and exports to grow to 1.0 billion yen (+134.7% growth over FY2016)

The FY2022 projection of the domestic total value for other equipment/parts not mentioned above is 173.4 billion yen (+2.3% growth over FY2016).

IV. Trends in the Info-Communication Industry Market (Chapters 4)

In the domestic ICT industry, value-added services, such as ICT solution businesses (system maintenance, server management/operation services), are expected to grow over the following years. Chapter 4 elaborates on this shift from telecom equipment to services in the ICT industry. It specifically focuses on (1) trends in cloud, IoT/big data/AI, security, SDN/NFV, (2) noteworthy applications of ICT in government growth strategies and (3) consumer facing services, such as 4K/8K contents and SNS, where growth from the use of ICT are expected.

[Reference] Scope of equipment covered

Domestic market forecasts are based on statistics compiled by CIAJ, with the cooperation of 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 IHS Markit with the cooperation of InfoCom Research, Incorporated.

Please contact Mr. Nakai (e-mail: s_nakai[at]ciaj.or.jp) to purchase a copy of the CIAJ FY2016 Mid-Term Demand Forecast for Telecommunication Equipment (6,000 yen + tax for CIAJ members, 19,000 yen + tax for non-CIAJ members). The CIAJ FY2016 Mid-Term Demand Forecast for Telecommunication Equipment is available in Japanese only.

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

For more general inquiries, contact

Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360

The Communications and Information network Association of Japan (CIAJ: a general incorporated association) announces the telecommunication equipment production and trade figures for April through September, 2017 as follows.

The Cabinet Office of Japan announced a +2.5% real GDP (annual) growth for July – September (2^nd update), making a positive 1.4% adjustment from its initial announcement. Unchanged from the earlier announcement was consumer spending at -0.5% and export growth at 1.5%, continuing to support the export-driven view of the economy.

The domestic telecommunication equipment market showed positive growth towards the end of FY2016, but reversed gear in the first half of FY2017 (year-over-year growth). Exports returned to positive growth from FY2017 Q2, the first time since the latter half of FY2015, or the first in seven quarters, fueled by parts demand for a major US smart phone manufacturer. Despite the uptake in domestic demand, imports remained basically flat.

I. Production Trends

(based on METI’s “Indices of Industrial Production”)

(1) Actual figures for first half of FY2017

The total value of domestic production in the first half of FY2016 was 248.7 billion yen (-10.6% year-over-year growth). Weakness in mobile phones, switching systems, digital transmission equipment and base stations contributed to the negative growth.

(2) Figures by equipment categories

1. Wireline terminal equipment: 28.8 billion yen (11.2% year-over-year growth) of which:

   Telephone sets accounted for 1.7 billion yen (-4.3% year-over-year growth), key telephones was 11.5 billion yen (-18.4% year-over-year growth), intercom was 15.0 billion yen (-1.2% year-over-year growth) and facsimile equipment was 600 million yen (-3.5% year-over-year growth). The round of replacement for key telephones ended in FY2016, resulting in the negative growth.

2. Mobile terminal equipment: 81.7 billion yen (-12.0% year-over-year growth) of which:

   Mobile phones accounted for 59.6 billion yen (-8.1% year-over-year growth) and public-use PHS terminals was 700 million yen (+31.9% year-over-year growth). Domestic demand for smartphones remains positive, but domestic production continues to decline.

3. Wireline network equipment: 58.9 billion yen (-13.6% year-over-year growth) of which:

   Switching systems accounted for 2.4 billion yen (-45.5% year-over-year growth), central office switching systems was 6.4 billion yen (-18.1% year-over-year growth), digital transmission equipment was 19.3 billion yen (-18.0% year-over-year growth) and other transmission equipment was 28.3 billion yen (-2.1% year-over-year growth). The central office switching system market is now solely parts replacement and maintenance. Construction of hotels and offices should lead to new demand for key telephones and PBXs, but the trend for smaller systems will push the unit investments down and not contribute to a recovery.

4. Wireless network equipment: 48.6 billion yen (-18.6% year-over-year growth) of which:

   Fixed telecommunication equipment accounted for 15.5 billion yen (-4.3% year-over-year growth) and base stations: 31.3 billion yen (-24.2% year-over-year growth). Despite higher domestic demand for base stations to accommodate traffic growth, the penetration of imports pushed domestic production significantly lower.

5. Network access equipment: 18.8 billion yen (+28.5% year-over-year growth). Robust demand for networks have kept growth positive since the latter half of FY2016.
6. Wireline parts (relays for wireline equipment, connectors, etc.): 13.7 billion yen (+2.6% year-over-year growth). Demand for high-end parts for a major U.S. smartphone brand has kept growth in the positive since the second half of FY2016.

II. Exports

(based on Ministry of Finance’s “Trade Statistics”)

(1) Actual figures for first half of FY2017

The total figure for exports in the first half of FY2017 was 242.1 billion yen (+9.9% year-over-year growth). Most categories had positive growth over the FY2016H1 figures, when the yen was much stronger. The export of mobile phones to the U.S. market showed significant growth. Demand for high-end parts for a major U.S. smartphone brand resulted in a positive turnaround for the first time in 2 years.

(2) Figures by equipment categories

1. Telephone sets and terminal equipment: 7.1 billion yen (+230.7% year-over-year growth) of which:

   Mobile phones accounted for 5.8 billion yen (+723.6% year-over-year growth), facsimiles was 30 million yen (-69.4% year-over-year growth), cordless handsets for landline phones was 200 million yen (+83.6% year- over-year growth) and other was 1.1 billion yen (-10.0% year-over-year growth).

2. Network equipment: 71.9 billion yen (-4.5% year-over-year growth) of which:

   Base stations accounted for 3.0 billion yen (-56.2% year-over-year growth), data communication equipment was 66.0 billion yen (-0.2% year-over-year growth) and other network equipment was 2.9 billion yen (+22.4% year-over-year growth).

3. Parts: 163.0 billion yen (+14.2% year-over-year growth).

(3) Figures by region

By region, Asia was 181.4 billion yen (+12.0% year-over-year growth), of which China was 95.3 billion yen (-2.0% year-over-year growth). North America was 34.3 billion yen (+11.1% over the same quarter of the previous year), of which the U.S. was 33.8 billion yen (+11.5% over the same quarter of the previous year). Europe was 19.1 billion yen (+1.8% over the same quarter of the previous year), of which the EU was 17.1 billion yen (+0.1% over the same quarter of the previous year). Exports of mobile phones to the U.S. sky-rocketed by 4,243%. The export of parts to China decreased to 50.7% of total exports, indicating adjustments in the production of smart phones in China and the shift in production to other Asian countries.

(4) Comparison and breakdown by regions

III. Imports

(based on Ministry of Finance’s “Trade Statistics”)

(1) Actual figures for first half of FY2017

The total figure for imports was 1.160 trillion yen (+0.9% year-over-year growth), continuing positive growth from FY2016H2. Mobile phones, which makes up 57% of total imports, decreased by 11.9%, reflecting the small impact of a major U.S. smartphone brand. Though small in yen value, the domestic demand for base stations grew by 133.2%.

(2) Figures by equipment categories

1. Telephone sets and terminal equipment: 660.5 billion yen (-11.7% year-over-year growth) of which:

   Mobile phones accounted for 651.9 billion yen (-11.9% year-over-year growth), facsimiles was 2.6 billion yen (+15.0% year-over-year growth), cordless handsets for landline phones was 2.6 billion yen (+10.8% year-over-year growth) and other was 3.4 billion yen (+5.9% year-over-year growth).

2. Network equipment: 336.5 billion yen (+25.8% year-over-year growth) of which:

   Base stations accounted for 24.3 billion yen (+133.2% year-over-year growth), data communication equipment was 302.8 billion yen (+21.8% year-over-year growth) and other network equipment was 9.4 billion yen (+12.0% year-over-year growth).

3. Parts (total of both wireline and wireless): 162.6 billion yen (+21.9% year-over-year growth).

(3) Figures by region

By region, Asia was 1.088 trillion yen (+0.5% year-over-year growth), of which China was 847.6 trillion yen (-8.2% year-over-year growth). North America was 38.2 billion yen (+12.7% over the same quarter of the previous year), of which the U.S. accounted for 37.4 billion yen (+14.6% over the same quarter of the previous year). Europe was 16.4 billion yen (+3.0% over the same quarter of the previous year), of which the EU was 15.8 billion yen (+1.6% over the same quarter of the previous year).

(4) Comparison and breakdown by regions

IV. Trends in Orders Received and Shipped

(from CIAJ statistics)

(1) FY2017H1 actual

CIAJ statistics for total orders received and shipped in FY2017H1 amounted to 842.3 billion yen (+3.6% over the same quarter of the previous year) for the quarter, of which the total value of domestic shipments totaled 647.3 billion yen (+2.1% over the same quarter of the previous year) and exports was 195 billion yen (+9.2% over the same quarter of the previous year).

(2) Figures by equipment categories

1. Wireline terminal equipment: 314.4 billion yen (+2.6% year-over-year growth):

   Both personal and office use multi-functioning facsimiles showed healthy growth over the previous year.

2. Mobile terminal equipment: 295.5 billion yen (+21.5% year-over-year growth):

   Mobile phones showed substantial year-over-year growth over FY2016 H1 which was impacted by the end to ¥0 (carrier subsidized) mobile phones.

3. Wireline network equipment: 71.5 billion yen (-13.1% year-over-year growth):

   PON, media converters and WDM transmission equipment categories exceeded FY2016 H1 figures.

4. Wireless network equipment: 119.7 billion yen (-15.1% year-over-year growth):

   The satellite communication equipment category indicated healthy growth, terrestrial communication equipment had slight growth, while base stations indicated a slight drop.

5. Other network equipment: 19.5 billion yen (-0.5% year-over-year growth). Routers had negative growth, while LAN switches indicated year-over-year growth.

6. Parts: 21.7 billion yen (+6.1% year-over-year growth).

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

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Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360

The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment and trade figures for April through June, 2017 as follows.

Japan’s GDP during April through June 2017 grew YoY (year-over-year) at an annual rate of 2.5% according to the preliminary figures announced this month by the Cabinet Office. This was the 6th consecutive quarter of positive growth. Consumer spending and housing investments remained healthy, but exports was sluggish, especially in electronic parts to China, and there seems to be a shift to economic growth led by domestic demand, rather than exports.

In the telecom equipment market, shift to overseas production continues, but domestic production is recovering, with the second consecutive quarterly growth from 2016 Q4. The adjustments in production by Chinese smartphone manufacturers resulted in shrinking demand for parts, leading to the 6^th consecutive negative growth in exports. On the other hand, the recovery in domestic demand has translated into positive YoY growth for all import categories.

I. Domestic Production

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

(1) FY2017 1^st quarter actual

The total value of production was 122.9 billion yen, or positive 4.4% growth over the same quarter in FY2016. Recovery of the domestic economy led to strong figures for mobile phones and wireless network equipment.

(2) Trend by categories

Actual figures by categories were as follows:

1. Wireline terminal equipment
   13.5 billion yen (-18.2% over the same quarter of the previous year). Of which telephone sets was 700 million yen (-24.5% over the same quarter of the previous year) and key telephones 5.0 billion yen (-34.8% over the same quarter of the previous year), intercoms 7.5 billion yen (-1.1% over the same quarter of the previous year) and facsimiles 300 million yen (-7.5% over the same quarter of the previous year). The completion of the round of renewals of key telephones pushed the figure back to 2015 Q1 levels.
2. Mobile terminal equipment
   43.9 billion yen (+21.8% over the same quarter of the previous year). Of which mobile phones was 35.3 billion yen (+34.0% over the same quarter of the previous year) and public-use PHS 400 million yen (+123.9% over the same quarter of the previous year). Demand for mobile phones made a huge come back – the first since the end to ¥0 (carrier subsidized) mobile phones in 2016 Q1.
3. Wireline network equipment
   28.9 billion yen (-9.9% over the same quarter of the previous year). Of which central office switching systems was 1.1 billion yen (-56.4% over the same quarter of the previous year), PBX was 2.9 billion yen (-16.7% over the same quarter of the previous year) and digital transmission equipment was 9.8 billion yen (-11.3% over the same quarter of the previous year) and other transmission equipment was 14.1 billion yen (+2.1% over the same quarter of the previous year). Among switching equipment, the drop in central office switching systems due to PSTN migration, as well as continued declines in replacement demand for enterprise PBXs after the spike in 2015 contributed to the overall decline. Construction of hotels and offices should lead to new demand for key telephones and PBXs, but the trend for smaller systems will push the unit investments down and not contribute to a recovery.
4. Wireless network equipment
   21.6 billion yen (+5.2% over the same quarter of the previous year). Of which fixed telecommunication devices was 5.6 billion yen (-23.7% over the same quarter of the previous year) and base station equipment was 16.0 billion yen (+21.2% over the same quarter of the previous year). Demand for base stations is increasing in order to accommodate rising traffic.
5. Network access equipment
   8.2 billion yen (+38.5% over the same quarter of the previous year). Demand for network equipment was strong, reflected in the YoY growth figure, but the yen value was similar to that of 2015 Q1.
6. Wireline parts
   6.8 billion yen (+2.4% over the same quarter of the previous year). Increased domestic production of mobile phones and healthy demand for parts of high-end smartphones by major U.S. and Korean brands contributed to the 3rd consecutive quarterly growth.

II. Exports

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

(1) FY2017 1^st quarter actual

The total figure for exports was 98.3 billion yen (-10.4% over the same quarter of the previous year), recording the 6th consecutive quarter of decrease starting in 2015 Q4. Exports of telephone sets and terminal equipment recorded positive year-over-year growth. In network equipment, domestic demand for base stations grew, while shrinking in exports. Data communications equipment recorded similar figures to previous Q1 numbers. Healthy demand for parts of high-end smartphones by major U.S. and Korean brands was not enough to offset decreased production and fierce competition in the in Chinese smart phone market, leading to an overall drop in exports.

(2) Trend by categories

Actual figures by category are as follows:

1. Telephone sets and terminal equipment 2.2 billion yen (+64.2% over the same quarter of the previous year)
   Of which, mobile phones was 1.4 billion yen (+147.7% over the same quarter of the previous year), facsimiles was 10 million yen (-82.5% over the same quarter of the previous year), cordless handsets for landline phones was 100 million yen (+54.7% over the same quarter of the previous year) and other was 700 million yen (+7.5% over the same quarter of the previous year).
2. Network equipment 36.1 billion yen (-6.8% over the same quarter of the previous year)
   Of which, base stations was 2.1 billion yen (-45.4% over the same quarter of the previous year), data communication equipment was 32.6 billion yen (-3.1% over the same quarter of the previous year) and other network equipment was 1.5 billion yen (+9.0% over the same quarter of the previous year).
3. Parts (both wireline and wireless) 60.0 billion yen (-13.8% over the same quarter of the previous year)

(3) Actual figures by region

By region, Asia was 69.2 billion yen (-12.5% over the same quarter of the previous year), of which China was 32.1 billion yen (-33.9% over the same quarter of the previous year). North America was 15.6 billion yen (-2.5% over the same quarter of the previous year), of which the U.S. was 15.3 billion yen (-2.1% over the same quarter of the previous year). Europe was 9.8 billion yen (-2.9% over the same quarter of the previous year), of which the EU was 8.8 billion yen (-5.1% over the same quarter of the previous year). The export of parts to China decreased to 44.3% of total exports, dropping from 70.5% in 2015 and 63.1% in 2016 – all indicating adjustments in the production of smart phones in China and the shift in production to other Asian countries.

(4) Comparison and breakdown by regions

III. Imports

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

(1) FY2017 1^st quarter actual

The total figure for exports was 582.7 billion yen (+12.9% over the same quarter of the previous year), recording the third consecutive positive quarterly growth from 2016 Q3. The higher domestic demand for mobile phones, which makes up 58% of total imports, contributed to the growth.  Though small in yen value, the domestic demand for base stations recorded the 5th consecutive positive quarterly growth since 2016 Q1.

(2) Trend by categories

Actual figures by category are as follows:

1. Telephone sets and terminal equipment 339.9 billion yen (+4.1% over the same quarter of the previous year)
   Of which, mobile phones was 335.4 billion yen (+4.0% over the same quarter of the previous year), facsimiles was 1.4 billion yen (+30.5% over the same quarter of the previous year), cordless handsets for landline phones was 1.4 billion yen (+13.0% over the same quarter of the previous year) and other was 1.7 billion yen (+0.8% over the same quarter of the previous year).
2. Network equipment 164.5 billion yen (+27.4% over the same quarter of the previous year)
   Of which, base stations was 8.8 billion yen (+100.6% over the same quarter of the previous year), data communication equipment was 150.6 billion yen (+24.6% over the same quarter of the previous year) and other network equipment was 5.1 billion yen (+31.6% over the same quarter of the previous year).
3. Parts (both wireline and wireless) 78.3 billion yen (+29.2% over the same quarter of the previous year)

(3) Actual figures by region

By region, Asia was 547.4 billion yen (+13.5% over the same quarter of the previous year), of which China was 406.4 billion yen (+1.0% over the same quarter of the previous year). North America was 18.1 billion yen (+5.4% over the same quarter of the previous year), of which the U.S. accounted for 17.7 billion yen (+6.7% over the same quarter of the previous year). Europe was 8.5 billion yen (+8.6% over the same quarter of the previous year), of which the EU was 8.2 billion yen (+7.0% over the same quarter of the previous year).

(4) Comparison and breakdown by regions

IV. Trends in Orders Received and Shipped

(from CIAJ statistics)

CIAJ statistics for total orders received and shipped amounted to 406.8 billion yen (+1.2% over the same quarter of the previous year) for the quarter. Telephone sets, telephone application equipment, multi-functioning facsimiles, mobile phones/smart phones, optical transmission equipment and telecom equipment parts recoded positive growth over the same quarter of the previous year.

The total value of domestic shipments totaled 316.6 billion yen (+1.9% over the same quarter of the previous year) and exports was 90.2 billion yen (-1.1% over the same quarter of the previous year).

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

For more general inquiries, contact

Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360

CIAJ conducted its annual study of mobile device use and announces the release of this year’s findings as follows.

MVNO awareness and market penetration have grown over the past year, with the ratio of people who have actually used MVNOs increasing. According to a study of monthly payments, cheaper plans are gaining popularity among subscribers, which can be assumed to be a direct impact of MVNOs. “Price” was also ranked among the top responses when asked about what factors would be important on their next purchase. All of this leads to the conclusion that demand for low prices is mounting among users.

(1) Summary

This study has been conducted as a fixed-point observation every April since 1998 to capture on-going changes in the domestic mobile communications market and include data from the busiest sales season of the year in March.

CIAJ mailed questionnaires to 1,200 mobile phones users (100 male & 100 female users in each of the following age groups: under twenty, twenties, thirties, forties, fifties, sixties) residing in the larger Tokyo and Osaka metropolitan areas from the end of March through early April of this year.

Unique findings from this year’s study are as follows.

(2) Handset Trends

<Type of terminal owned>

• The 1,200 people surveyed owned a total of 1,726 terminals and their breakdown is listed in the following table.
• 1,088 respondents (90.7%) said their main-use terminal (primary choice terminal) was a smartphone, while 110 respondents (9.2%) said it was a feature phone.

  <Type of terminal owned by respondents of study>

  Type of terminal owned	No. of devices	Main-use device (Primary choice)
  Smartphone	1,090 (90.8%)	1,088 (90.7%)
  Featurephone	123 (10.3%)	110 (9.2%)
  Tablet (with telecom subscription)	232 (19.3%)	1 (0.1%)
  Tablet (with only Wi-Fi connectivity)	80 (6.7%)	1 (0.1%)
  Mobile Wi-Fi router	197 (16.4%)	0
  PHS	4 (0.3%)	0
  Total (including other responses)	1,726	1,200 (100.0%)

<Accelerated growth in smartphone users continues>

• The 2017 survey showed continuous growth in smartphone users with a 7.0% increase to 90.8%.
• Smartphone use among respondents in their teens, twenties and thirties had nearly reached 100% in last year’s study, but the 2017 study reveals that penetration has spread in older generations, with respondents in their fifties exceeding 80% and exceeding 60% among those in their sixties.

  <Change in Percentage of Smartphone Users Over the Years>

  

<Tablets are dominant as second device, but flat growth>

• Of the 1,088 smartphone users, 435 (41.5%) were using multiple devices, an increase of 5.6 points (last year’s multi-device users were 351 (35.9%)) over the previous year.
• The rate of respondents who use tablets (with telecom subscription) was still the most popular choice as a second device, but the total number of devices for tablets with both telecom subscription and only wi-fi connectivity decreased slightly from 304 in 2016 to 297 and so did the ratio of users.
• On the other hand, the number of respondents using mobile wifi routers increased from 9.4% to 24.6%.
  

(3) Trends ion New Services

<MVNO ultra low-end smartphone users still a minority but expected to grow>

• 79.6% of smartphone users (n=1,067) stated that they were aware of MVNO.
• Of smartphone users, 16.3% had actually bought an ultra low-end smartphone, compared to 9.0% in the 2016 survey, reflecting their penetration in the market.

  <MVNO Ultra Low-End Smartphone Use>

  

<Satisfaction with MVNO>

• MVNO users (n=138) gave high marks about the service, with high satisfaction concerning speed, data transmission limits, rates and other items. The number of those surveyed who were happy with the family discount rates jumped from 57.0% to 97.9%. However, satisfaction rates for post-purchase services dropped from 91.9% to 59.1%.

  <Views After Trying MVNO>

  

(4) Purchasing Cycles

<Slowing growth in intention to replace devices>

• 57.9% of respondents indicated intention to purchase a replacement, showing a continuation of a downward trend. This drop was especially prevalent among smartphone users, dropping from last year’s 85.1% to 60.5%.

  <Intent to purchase replacement of current model>

  

<Longer purchasing cycles>

• The average use of respondents’ previous model (the one before the handset currently in use) was 30.0 months for smartphones and 55.1 months for featurephones and 32.0 overall. The cycle for smartphones had been shortening until last year, but converted to longer duration this year, indicating a lull in the purchase of smartphones.

  <Change in Duration of Ownership>

  

<Next purchase likely to be a smartphone again>

• Among smartphone users, 99.5% of those intending to purchase a replacement responded that they planned to choose a smartphone again.
• Among featurephone users, 87.9% of those intending to purchase a replacement responded that they planned to choose a smartphone, leading to the conclusion that smartphone user rates will continue to grow.

  <Intent to purchase replacement of current smartphone (n＝1,079)>

  

  <Intent to purchase replacement of current featurephone (n=104)>

  

(5) Decisive Factors for New Purchases

<Decisive factors in purchasing smartphones/feature phones>

• The top ranking decisive factors in making the next purchase for smartphone users were “purchase price of handset,” “monthly payment cost,” “design” and “size (snugness in one’s hand),” with all items exceeding 80% and last year’s top choice, “manufacturer/brand.” The top two factors, “purchase price of handset” and “monthly payment cost,” jumped from 3rd and 4th place in 2016, reflecting user emphasis on cost.
• Top ranking factors for featurephone users were also “purchase price of handset” and “monthly payment cost.”

<Decisive factors in purchasing smartphones/featurephones>

(6) Use of Handset Features and Services

<Changes in use of smartphone features and services>

• The study has looked at the use of various features and services of mobile handsets over the years. The table below indicates user ratio and year-over-year change in use, duration and frequency.
• The use of features and services are diverse and it is the hope of this committee that manufacturers reflect these trends in future designs of their products and services.

  <Change in Use of Smartphone Features and Services>

  Use scenario	Rate of use (%)			Duration and frequency of use
  	2016		2017
  Voice communication (circuit switched)	97.1	→	96.3	↗
  IP phone (LINE, Skype, etc.)	56.4	↘	19.6	↘
  SMS/MMS	88.2	→	87.7	↗
  Carrier mail	8.1	↗	12.7	→
  Internet mail	86.7	↘	81.9	↗
  SNS messages	91.7	→	92.1	→
  Normal e-mail based on text	93.6	→	91.8	↗
  Decorated messages, emoji	64.8	↘	51.2	↗
  Photo-attached e-mail	84.2	↘	63.6	↘
  Video-attached e-mail	48.2	↘	30.1	↘
  Downloading music	80.3	↘	67.8	↗
  Downloading video	73.2	↘	64.9	↗
  Downloading games	78.0	→	75.0	↗
  Downloading items for games	43.9	→	46.6	↗
  Downloading digital books	40.1	↘	29.8	↗
  Downloading stamps	45.4	↗	57.9	↗
  Viewing and writing in LINE	93.3	→	91.7	→
  Watching videos	85.0	→	84.9	↗
  Music features	83.8	↘	66.7	↘
  Viewing and writing inTwitter, Facebook and other SNS	84.7	↘	80.0	↗
  Watching news and reading newspapers	48.3	↗	56.1	↗
  Watching tv	10.1	↗	38.6	↗
  Internet payments	77.6	↘	43.3	→
  Using camera for still photos	91.6	↘	87.6	↘
  Using camera for video	53.9	↗	58.7	↘
  Maps, navigation, GPS logger, location information	86.9	↘	73.9	→
  Scheduling	82.0	↘	67.2	→
  Cloud memo management	44.8	↘	28.8	↘
  Viewing PC files (Office, PDF, etc.)	38.0	↘	25.1	↘
  Using coupons	70.7	↘	62.5	↘
  Text entry using voice recognition	48.8	↘	25.1	↘
  QR code	66.0	↘	62.1	↘
  Translation apps using voice recognition	48.0	↘	22.6	↘
  Bluetooth (wireless headsets, keyboards, etc.)	47.6	↘	13.2	↘
  International roaming, use abroad	27.0	↘	17.4	↗

Arrows under rate of use as well as duration and frequency of use indicate change over the previous year.

For details, contact

Products & Technologies Development
CIAJ
tel: 81-3-5403-9358 fax: 81-3-5403-9360

For more general inquiries, contact

Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360

The Communications and Information network Association of Japan (CIAJ) announced its “FY2016 Report on the Study of the IoT Market (tentative translation).”

CIAJ has been promoting the spread of the IoT society as part of its effort to create new markets. Accurately grasping trends is crucial for gaining new market entry and market share in the growing IoT market. Thus, CIAJ has conducted a study to analyze the evolving IoT market by relevant categories and has released the findings in a report.

1. Summary

For the purpose of this study, the “IoT ratio” was defined as the percentage of “IoT devices” with the ability to connect to the network against all devices, which includes those that are not IoT compatible. It can be assumed that industries and device categories with low IoT ratios have growth potential.

Globally, there were approximately 5.4 billion devices worth about 600 billion US dollars (both 2015 figures) shipped as “IoT devices” that would be included in the categories covered in the study. This would amount to only about 20% IoT ratio. Both the number of devices and “IoT ratio” are expected to grow, meaning that it will be important for Japanese brands to focus on markets abroad where there is high potential for IoT penetration. Especially promising areas are smart appliances for the home in the consumer market and monitoring cameras for industrial uses.

In the Japanese domestic market, there were approximately 100 million devices worth about 30 billion US dollars (both 2015 figures) shipped as “IoT devices.” This would amount to about 60% IoT ratio, which is significantly larger than the global figure. Even though the IoT ratio is almost 100% in the communications category, the launch of 5G from 2018 onward will use new terminals and infrastructure equipment embracing new technological standards, meaning even more growth opportunities for IoT.

2. Study Methodology

(1) Scope of the study

In order to grasp IoT market trends accurately, 4 layers and 11 categories were chosen as the scope of the study. Of these CIAJ determined the categories which needed to be understood for the 2016 study and commissioned an external research company to collect the data. However, the IoT services field is still young, making it difficult to collect data. Thus, the scope of the study was tentatively narrowed down to categories centered around devices and hardware (communications, consumer, industrial, automobiles, healthcare) and cloud services. In order to continue studying data in the future and predict growth categories, gaining accurate actual figures was considered vital. Thus, it was decided to first grasp 2015 actual figures, estimate the numbers for 2016 and forecast 2017 from there. In using data from the external research company, verification was conducted by comparing statistics collected independently by CIAJ for the same categories.

Diagram 1: Outline of the IoT Market Study
Years covered: 2015 actual, 2016 expected, 2017 forecast
Units: number of devices, value of units sold (in US dollars)
Geographic scope: Japan and the rest of the world (North America, Latin America, Europe/ Middle East/ Africa, Asia-Pacific
Scope of categories: communications, consumer, industrial, automobile, healthcare, cloud

(2) IoT ratio

“IoT devices” is defined as devices which connect to other devices or the internet via wireline or wireless communications. IoT ratio is defined as the ratio derived from the number of devices or monetary value of “IoT devices” with the ability to connect to the network against all devices, which includes those that are not IoT compatible. According to this definition, the communications category, where almost all devices connect to the network has almost 100% IoT ratio. Among x-ray image diagnosis devices, there are those that would fall under IoT devices, allowing transmission of digital x-ray image data within the hospital, while some are analog and not IoT compatible, requiring the x-ray image to be distributed physically. The IoT ratio of x-ray image diagnosis devices is approximately 70%.

IoT ratio of various devices = (Scale of devices which are IoT compatible)/ (Scale of all devices) (=denominator)

IoT ratio of all categories covered in the study = (Scale of devices which are IoT compatible among all categories covered in the study)/ (Scale of all devices among all categories covered in the study)

3. Results

(1) IoT market trends based on the number of devices shipped

• “IoT devices” in all categories covered in the study for 2015 amounted to 5.456 billion devices globally, of which 110.08 million devices, or about 2%, were shipped from Japan.
• Both global and Japanese data show that in the communications category, which includes smartphones, the IoT ratio is approximately 100%. Globally, the IoT ratio for other categories is much lower, with the figure for all categories, even in 2017, averaging at 20%, meaning that there is significant room for growth. In Japan, the IoT ratio is led by the consumer and automobile categories, with an overall ratio of over 60%.

Diagram 2: IoT market trends based on the number of IoT devices shipped

(2) IoT market trends based on the value of IoT devices shipped

• The value of IoT devices shipped (2015) was 602.2 billion U.S. dollars globally and 32.5 billion U.S. dollars for Japan, which accounts for approximately 5% of the global figure.

Diagram 3: IoT market trends based on the value of IoT devices shipped

(3) IoT market trends based on the value of IoT devices shipped by category

• The global IoT device market, by the value of shipments, is expected to remain flat, with growth in the value of consumer and industrial use categories not enough to make up for the rapid decline in the price of communication terminals, namely mobile phones and smartphones, as well as the shrinking communication infrastructure market, as technology shifts from 2G to 4G. The drop in price of communication terminals in Japan is not as sharp as in the rest of the world, thus, the value of shipments is increasing for the country. Terminals and infrastructure equipment optimized for the shift to new technologies, such as 5G, should push both the global and Japanese markets into positive growth from 2018 onwards.
• PC-related equipment and printers currently make up a large share of the consumer category in both Japan and the rest of the world, with a high IoT ratio and not much change expected in total value. If PC-related equipment and printers are excluded, the global IoT ratio in this category is currently low. However, the strong push in connected smart appliances from 2016 onwards and the further embrace of wearable health monitoring devices as people become more health conscious should have a positive impact on market growth and advances in IoT.
• The high IoT ratio in industrial uses is led by its application in smart vending machines. The IoT ratio of lighting and security equipment (digital locks, physical security equipment, monitoring cameras) in both the global and Japanese markets is low, but is expected to grow rapidly with the spread of intelligent networks, real-time production management, production-site monitoring for energy conservation and security initiatives (This year’s study did not cover factory automation and IoT compatibility of retail/logistic equipment, which are still expected to be of limited use).
• In the automobile category, Japan leads in the IoT ratio (nearing the figure for communications) with the spread of on-board car navigation systems and ETC (cashless tolls). Progress in IoT and growth of the market is projected for global and Japanese markets with advances in the connected car.
• In healthcare, the spread of electronic medical records and remote medicine has pushed the IoT ratio to 20%, with room for further growth as personal healthcare devices, such as blood pressure monitoring devices, and advanced clinical equipment become IoT compatible.

Diagram 4: IoT market trends based on IoT devices category

Diagram 5: IoT market trends based on IoT ratio of IoT device categories

4. Conclusion

This year’s study was focused on equipment and hardware, but in the number of units shipped, the IoT device market is growing, with the value also expected to increase. The growth is also expected to be fueled by new technologies. With a low IoT ratio of about 20%, the global IoT market especially holds potential for Japanese manufacturers in the area of exports. Gaining an accurate grasp of the progress in IoT will allow ICT to resolve social challenges and create new markets.

In addition, a separate study has found the cloud business to be growing at approximately 50% in value and can be expected to further the growth in IoT. With this in mind, CIAJ will consider expanding the scope of the service category in the 2017 study.

Note

• This year’s report was compiled by CIAJ’s Research and Statistics Sub-committee and the Market Research and Statistics Department with the cooperation of IHS Global.
• The Report is available for CIAJ members and is accessible via the member portal site (in Japanese only).

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

For more general inquiries, contact

Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360

  The Telecommunications Carrier Association (TCA) and CIAJ are working to improve the efficient use of materials in mobile phones and PHS devices through the “Mobile Recycling Network (MRN)”

  As part of this endeavor, TCA, with the cooperation of mobile operators providing mobile phone and PHS services, created MRN in April, 2001, which voluntarily collects used mobile and PHS terminals, battery chargers, and batteries, mainly through the approximately 9,000 retail outlets throughout Japan, regardless of carrier or manufacturer. As of the end of FY2016, MRN had collected over 120 million devices.

  Meanwhile, CIAJ established the “Environmental Assessment Guideline for Mobile and PHS Terminals,” in March, 2001 as a guideline for manufacturers to assess their products and promote the 3R activities (reduce, re-use, and recycle).

  The actual figures for recycling in FY2016 are as follows.

1. Figures for Recycling and Re-Use in FY2016

(1) Figures for Recycling

The number of mobile and PHS terminals collected in FY2015 decreased slightly from the FY2015 figure by 40,000 terminals (-0.7%). With the popularity of smartphones, handsets were increasingly equipped with multiple advanced features and consumers began holding on to older models to be used for non-communication purposes even after switching to another model. In addition, the market for businesses dealing in second hand devices (re-use) has taken root. All of these trends have contributed to flat growth in collected devices.

(2) Figures in Re-Use

  Metals used in mobile and PHS terminals include steel, aluminum, magnesium, gold, silver and copper. Gold, silver, copper and palladium are refined and re-used. The slug resulting from this refining process is used for road beds and shore-line tetrapods.

  Non-metallic material (plastic, glass, etc.) are also processed for recycling. Plastics are dissolved at low temperatures into resins to be made into hangers, plastic containers, toys and other every-day goods.

(3) Voluntary Numeric Targets

  Since FY2009, carriers have set several numeric targets in order to further promote recycling activities. Last year’s achievements per target are listed below.

(*1) Assessed from a survey of user awareness and behavior.
(*2) Material recycling rate of handsets for MRN (the recycling rate of metals and other materials extracted from collected terminals: excludes heat recovered materials).
(*3) Collection rate for all carriers.
Collection rate = “total number of devices of all carriers collected at licensed shops and other locations” / (“total number of subscribers who changed models at licensed shops and other locations” + “total number of mobile phone contract terminations”)

  The MRN collection rate declined slightly and fell below the target again. This likely reflects the continuing popularity of smartphones with numerous advanced features and we can assume that when upgrading handsets or switching to a different carrier, more and more consumers continue using the older smartphones for their ability to access wireless LAN networks even after the termination of their carrier contracts. Another factor which has carried over from the previous year and seems to be taking root is that consumers are provided with the choice of selling their devices for re-use to dedicated businesses.

2. Survey on User Awareness and Behavior

  An annual survey of two thousand mobile phone and PHS users was conducted to gain a better understanding of recycling perceptions and behavior.

(1) Smartphone users accounted for 60% in last year’s survey, but grew to account for 67% in this year’s survey.

(2) The survey shows that among those who changed handset models or terminated their contract in the past year, 19% returned their handsets to the retail shop, up 2% over the previous year. The figure for those who had returned their handsets includes people who asked the service provider shop to dispose of their terminal, those who sold their old devices, and those who gave their terminals to an acquaintance.

(3) People who returned their handsets to a store specializing in mobile handsets was the largest group at 70%. Smartphones had the highest rate of being sold or traded in, and traditional feature phones had the highest rate of being handed over for recycling.

(4) Among the respondents who have a handset(s) used for a purpose other than as a communication device, the most popular use (multiple answers possible) was “no specific reason, but want to keep the device” (26%) and “kept as part of a collection or for sentimental reasons (emotional attachment to the handset)” (22%), followed by “kept to hold on to data (photo, e-mail, contents, etc.)” (21%). The response was not very different from the previous year’s survey.
On the other hand, 15% of respondents chose “worried about disclosing personal information” as a reason for holding on to their handsets, even after they no longer used them. 11% indicated that the reason for holding on was that they “did not know how to dispose of their handsets.” More efforts to promote MRN, especially information on such measures as data transfer, proper erasure of personal data and assistance at MRN participating retailers are still necessary.

(5) Among the respondents who have a handset(s) used for no purpose, 58% stated that they would definitely like to or might be willing to dispose the handset, if it is a feature phone and over 50% if it is a smartphone. 28% stated they definitely do not want to or rather prefer not to dispose the handset, if it is a feature phone and a much greater 22% if it is a smartphone. This indicates that there is greater reluctance to dispose of the handset if it is a smartphone and thus, a greater likelihood of keeping the device compared to feature phones. It will be necessary to continue monitoring user trends to determine if this phenomenon will continue, or if it will plateau after smartphones reach a certain saturation point.

(6) Only 17% of respondents said they had seen notices from local governments concerning how to dispose of no-longer needed mobile devices. There will be greater need to gain the cooperation from local authorities concerning the law on the recycling of small home appliances implemented on April, 2014. Of the respondents who had seen notices, the largest group said they got information through a “newsletter issued by the local government,” while others said they saw the information in a “waste disposal calendar” or “waste disposal manual” distributed by the local  government.

(7) Awareness of the recycling of mobile phones and PHS equipment, including the logo, has not made headway, indicating the need for further efforts.
Awareness of MRN: FY2015 (56%) FY2016 (56%)
Recognition of logo: FY2015 (18%) FY2016 (18%)

(8) Upon showing documents on the significance of recycling handsets and introducing MRN activities, 64% of all respondents said they would definitely like to or might be willing to cooperate in collection for recycling efforts. 65% of smartphone users gave such a response, indicating the future challenge in how to link such sentiment to actual MRN collection behavior among users.

3. Measures to Improve Recycling

(1) Take steps to increase awareness

As a way to increase  awareness of recycling activities by MRN, efforts will continue to provide  information on websites, catalogs, manuals and billing material. Emphasis on  activities such as posters introducing MRN at stores specializing in mobile handsets, stickers, pamphlets/leaflets, coverage by the press as well as working with local authorities who are responsible for trash collection will continue. In order to promote collection, we will strengthen efforts to provide guidance at specialty stores when users change models or terminate their contracts.

(2) Increasing the opportunities for collection

MRN will work closely with the “Cellular Phone Recycling Promotion Council (tentative translation)” organized by the Ministry of Internal Affairs and Communications (MIC) and composed of large-volume retailers, ICT manufacturers, telecom carriers and relevant organizations, to encourage easier consumer access to recycling, conduct appropriate protection of personal information, increase collection opportunities and raise awareness.

(3) Take measures to increase collection

1. To increase collection rates among users who have sentimental attachments to information and data (photos, e-mail records, etc.) on their used handsets, increased support at retailers together with more information on availability of data transfer and improving the ease of backing up or transferring data stored on old models to new models will be made.
2. In order to ease user  anxiety over leaking personal data, more effort to improving implementation and oversight of resetting or complete data erasure/destruction at specialty and retail stores (i.e. drilling a hole through the handset keyboard) will be key factors in encouraging users to feel more comfortable taking their handsets they no  longer use to MRN-participating retailers.

(4) 3R measures

1. 11 domestic manufacturers, who are CIAJ members, conducted a FY2016 environmental assessment of mobile phones and PHS devices in March. With the increasing popularity of smartphones, manufacturers are designing the devices to be slimmer and lighter as well as enhancing their features. They are simultaneously complying to the “Environmental Assessment Guideline for Mobile and PHS Equipment” and actively promoting the 3Rs.
2. More than ever, mobile phones and PHS devices are emphasizing enhanced features and slimmer and stylish designs with the popularity of smartphones. At the same time, there is greater interest in society about the 3Rs. With the implementation of the law on the recycling of small home appliances 4 years ago, local authorities are able to systematically collect small home appliances, including mobile phones and PHS devices. Manufacturers need to balance fulfillment of user needs with 3R responsibilities, and continue designing products based on environmental impact assessment.
   Concerning the management of the 4 types of phthalates specified by the EU RoHS directive, manufacturers have confirmed their use in their products according to the assessment guideline. All manufacturers are determined to continue to increase their 3R efforts for mobile phones, PHS devices, and data communication devices.

Mobile Recycling Network
URL: www.mobile-recycle.net (Japanese)

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Products & Technologies Development
CIAJ
tel: 81-3-5403-9358

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tel: 81-3-5403-9351 fax: 81-3-5403-9360

  The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment and trade figures for FY2016 April through March) as follows.

  The Japanese economy continued its gradual recovery in FY2016. The strong yen and slower growth among emerging markets, foremost China, led to a slower growth rate for Japan in the first half of the year, but growth in consumer spending and recovery in demand for smartphones, mainly in Asia, contributed to improveds figures for electric parts and devices in the latter half. However, enterprises reamined cautious about capital investments throughout the entire year.

  Domestic production of telecommunication equipment decreased as relocation of manufacturing facilities overseas in order to meet global market demand and associated shipments. In addition, domestic mobile phone brands suffered from the end to ¥0 (carrier subsidized) mobile phones in the first half of the year, but there are positive signs as the overall Japanese economy recovers.

  Due to the stronger yen in the first half, the total value of exports in FY2016 recorded negative growth for the year for the first time in four yeras in all categories. However, parts for smartphone production overseas showed signs of recovery in the latter half. Imports recorded negative growth for the first time in seven years with reluctance among businesses to make capital investments and the end to ¥0 (carrier subsidized) mobile phones, but again, there are signs of recovery in the latter half in mobile phones and data transmission equipment.

I. Domestic Production

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

(1) FY2016 actual

  The total value of production in FY2016 was 688.9 billion yen, or negative 7.0% growth over FY2015. It was the first time in five years that the negative growth was single-digit. All equipment categories, with the exception of mobile phones and applied telephone equipment recorded negative growth.

(2) Trend by categories

  Actual figures by categories were as follows:

1. Wireline terminal equipment
   63.3 billion yen (+0.9% over FY2015). Of which telephone sets was 3.3 billion yen (-7.9% over FY2015), key telephones was 26.0 billion yen (+6.7% over FY2015), intercoms 32.7 billion yen (-1.4% over FY2015) and facsimiles 1.4 billion yen (-21.0% over FY2015). Key telephones saw an uptake in renewals, which was enough to make up for lower per unit prices.
2. Mobile terminal equipment
   281.4 billion yen (+15.9% over FY2015). Of which mobile phones was 149.4 billion yen (-20.4% over FY2015) and public-use PHS 1.1 billion yen (-58.8% over FY2015). The shift to production of mobile phones overseas continued and the impact of the end to ¥0 (carrier subsidized) mobile phones had a negative impact, but the category as a whole grew YoY, helped by a rebound in enterprise radio equipment (such as MCA), pushing terrestrial mobile equipment up by 187.9% to 116.7 billion yen as well as the overall category into positive growth.
3. Wireline network equipment
   144.4 billion yen (-18.4% over FY2015). Of which switching systems was 35.9 billion yen (-26.9% over FY2015) and transmission equipment 108.6 billion yen (-15.2% over FY2015). Central office switching systems saw the second consecutive drop of over 50% at 55.2% (8.8 billion yen), as public switched telephone networks (PSTN) migrated to IP networks. There was a significant decline in the transmission equipment category again, with the further shift to overseas production leading to the 46.2 billion yen, or 9.6% decline in demand for digital transmission equipment.
4. Wireless network equipment
   138.9 billion yen (-28.8% over FY2015). Of which fixed telecommunication devices was 42.1 billion yen (-27.4% over FY2015) and base station equipment was 96.8 billion yen (-29.5% over FY2015). There was demand growth for base stations from investments in high speed 3.5GHz mobile infrastructure, but much of the growth was taken by imports, resulting in the drop in domestic production.
5. Network access equipment
   34.3 billion yen (-5.6% over FY2015). Like wireline network equipment, the wave of domestic demand has dwindled and domestic production recorded a drop.
6. Wireline parts
   26.6 billion yen (-1.7% over FY2015). Recovery in the latter half of the year in mobile phone production in China was not enough to push the figure into positive numbers, and ended up recording negative growth for the first time in seven years.

II. Exports

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

(1) FY2016 actual

  The total figure for exports in FY2016 was 464.3 billion yen (-17.6% year-over-year growth), recording negative growth for the first time in four years. The figure for telephone sets & terminal equipment decreased, due to the significant drop in mobile phones which has continued since FY2014. Network equipment and base stations remained flat, but all categories were affected by the stronger yen and the net performance for the year was below 2015 figures. This included parts, which was also impacted by slower growth among emerging markets and sluggish production of mobile phones, all leading to negative growth for the first time in four years. However, there are signs of mobile phone, especially smartphone demand, picking up in Asia.

(2) Trend by categories

  Actual figures by category are as follows:

1. Telephone sets and terminal equipment 4.2 billion yen (-21.8% over FY2015)
   Of which, mobile phones was 1.5 billion yen (-37.2% over FY2015), facsimiles was 0.2 billion yen (-46.0% over FY2015), cordless handsets for landline phones was 0.2 billion yen(-15.4% over FY2015) and other was 2.3 billion yen (-3.8% over FY2015).
2. Network equipment 158.9 billion yen (-12.4% over FY2015)
   Of which, base stations was 12.4 billion yen (-1.1% over FY2015), data communication equipment was 141.5 billion yen (-13.5% over FY2015) and other network equipment was 5.0 billion yen (-5.4% over FY2015).
3. Parts (both wireline and wireless) 301.1 billion yen (20.1% over FY2015).

(3) Actual figures by region

  By region, Asia was 347.1 billion yen (-18.0% over FY2015), of which China was 202.0 billion yen (-29.7% over FY2015). North America was 64.7 billion yen (-19.1% over FY2015), of which the U.S. accounted for 63.5 billion yen (-19.5% over FY2015). Europe was 37.5 billion yen (-0.5% over FY2015), of which the EU was 33.7 billion yen (-0.5% over FY2015). Exports to China, which accounted for 70.5% of all exports, accounted for only 60.3% in FY2016, with the difference shifting mainly to other parts of Asia. The export of parts to Europe is also showing signs of increasing.

(4) Comparison and breakdown by regions

III. Imports

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

(1) FY2016 actual

  The total figure for exports in FY2016 was 2.632 trillion yen (-3.4% year-over-year growth), which was the first decline in seven years. Mobile phones, which makes up 64% of total imports, recorded the first decline since the category was established in FY2007, again, due in part to the impact of the end to ¥0 (carrier subsidized) mobile phones, but towards the end of the fiscal year, robust sales of new winter/spring 2017 models indicate increasing demand for upgrades in preparation for the new fiscal year. The import of base stations increased as infrastructure investments in mobile networks to accommodate 3.5 GHz high-speed communications picked up.

(2) Trend by categories

  Actual figures by category are as follows:

1. Telephone sets and terminal equipment 1.705 billion yen (-3.4% over FY2015)
   Of which, mobile phones was 1.687 trillion yen (-3.3% over FY2015), facsimiles was 5.4 billion yen (+24.3% over FY2015), cordless handsets for landline phones was 5.2 billion yen (-13.4% over FY2015) and other was 7.0 billion yen (-19.8% over FY2015).
2. Network equipment 623.3 billion yen (-3.8% over FY2015)
   Of which, base stations was 33.9 billion yen (+127.8% over FY2015), data communication equipment was 571.5 billion yen (-6.2% over FY2015) and other network equipment was 17.8 billion yen (-25.3% over FY2015).
3. Parts (both wireline and wireless) 304.0 billion yen (-2.8% over FY2015).

(3) Actual figures by region

  By region, Asia was 2.481 trillion yen (-3.1% over FY2015), of which China was 2.125 trillion yen (-4.5% over FY2015). North America was 72.7 billion yen (-12.5% over FY2015), of which the U.S. accounted for 69.7 billion yen (-11.9% over FY2015). Europe was 35.7 billion yen (-7.9% over FY2015), of which the EU was 34.5 billion yen (-9.0% over FY2015).

(4) Comparison and breakdown by regions

IV. Trends in Orders Received and Shipped (from CIAJ statistics)

  CIAJ statistics for total orders received and shipped amounted to 1.844 trillion yen (-7.4% over FY2015). The total value of domestic shipments totaled 1.473 trillion yen (-8.8% over FY2015) and exports was 371.4 billion yen (-1.1% over FY2015).

(1) Wireline terminal equipment : 348.6 billion yen (-4.1% over FY2015).
VoIP-GW shipments for telecommunication carriers exceeded the figure from FY2015, helped by the continuing migration from copper cable access traditional telephones. Multi-functioning personal facsimiles also saw significant growth as it penetrated the office-use market.

(2) Mobile terminal equipment : 594.8 billion yen (-15.9% over FY2015).
Robust sales of new winter/spring 2017 models indicating increasing demand for upgrades in preparation for the new fiscal year was seen towards the end of the fiscal year, but was not enough to offset the negative impact of the end to ¥0 (carrier subsidized) mobile phones in the first half.

(3) Wireline network equipment : 147.8 billion yen (-14.1% over FY2015).
Growth categories were other switching equipment and media converters.

(4) Wireless network equipment : 311.6 billion yen (+3.8% over FY2015).
The launch of satellites proceeding on-schedule helped bring about positive YoY growth for satellite communication equipment. Despite reluctance in overall capital investments, base stations increased as infrastructure investments in mobile networks to accommodate 3.5 GHz high-speed communications picked up and contributed to nearly flat growth for the category as a whole.

(5) Other network equipment : 39.8 billion yen (-0.1% over FY2015).
Both routers and LAN switches exceeded FY2015 figures.

(6) Parts: 30.5 billion yen (-6.5% over FY2015).

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Market Research
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tel: 81-3-5403-9356 fax: 81-3-5403-9360

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CIAJ
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The Communications and Information network Association of Japan (CIAJ) announces the release of “The Study on Global Telecommunications Equipment Trends (unofficial translation: available in Japanese only).”

This Study continues to look at global business activities by Japanese manufacturers to capture changes in production and shipment figures. It focuses on the four categories of mobile phones, digital transmission equipment, base stations for mobile networks and backhaul equipment to reveal their unique production and shipping landscape.

1. Outline

Global demand for telecommunication equipment continues to grow, although at a slower pace. On the other hand, domestic production and shipment by Japanese manufacturers have continued to decline over the years, but their production and shipments overseas has increased and together with the weaker yen, they almost made up for the domestic losses, ringing in at a combined year-over-year (YoY) growth rate of -0.6% from 2014. When focusing only on overseas activities, overseas production by Japanese brands grew +6.3% YoY in 2015 and exports from overseas sites grew by 3.4%.

[Diagram 1: Value of Shipments by Japanese/foreign brands in the Global Telecom Market]

Comparisons of 2015 figures for Japanese brands in the global market reveals the following:

1. Of the total production figure for Japanese brands (2.692 trillion yen), approximately 70% is the value of products produced abroad, and an increasing amount of about 40% of the former figure is the value of products manufactured abroad and exported to overseas markets (including the country of origin), or Out-Out. This leads to the conclusion that domestic production and shipment data alone are not accurate reflections of the actual state.
2. The share of foreign brands in the Japanese market (2.726 trillion yen) has grown to approximately 50%. This means that looking only at domestic production and shipment figures was capturing only about half of the actual Japanese market.

[Diagram 2: 2015 Manufactured Goods and Flow of Shipments for the Telecom Equipment Market]
In-In: Domestic production shipped domestically
In-Out: Domestic production exported overseas
Out-In: Overseas production imported into Japan
Out-Out: Overseas production shipped overseas without going through Japan

2. Changes in the flow of production and shipments by Japanese brands in the telecom equipment market

The insights gained from domestic production and shipment statistics for Japanese manufacturers reveals a 43% decline in the “In-In” category from 2012 to 2015. Looking at just these numbers imposes an impression that Japanese brand presence in the domestic market has drastically dwindled. However, the growth in overseas production (3) reveals that the actual overall decline (overseas production (3) + domestic production (4)) is about 8%. Furthermore, the continuous growth of overseas shipments by Japanese brands (In-Out + Out-Out) indicates that their presence in the global market (by value) has not shrunk.

The growth in overseas shipments by Japanese brands (In-Out + Out-Out) is approximately matched by the growth in domestic shipments of foreign brands, meaning that in the Japanese market, where there is little change in total value, the share by foreign brands has increased.

3. Other

This study looked not only at the entire telecommunication equipment market but also at mobile phones, digital transmission equipment, base stations for mobile networks and backhaul equipment to reveal their unique production and shipping trends and gain a better understanding of Japanese brands in the domestic and global markets. CIAJ will continue to study global market trends with the grasp of the global picture becoming increasingly important.

Please e-mail to CIAJ(e-mail: ciaj-report[at]ciaj.or.jp) to purchase a copy of the Study on Global Telecom Equipment Market Trends (6,000 yen + tax for CIAJ members, 19,000 yen + tax for non-CIAJ members).

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

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Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360

The Communication and Information network Association of Japan (CIAJ) announces the telecommunication equipment and trade figures for October through December, 2016 as follows.

Japan’s GDP during October through December 2016 grew YoY (year-over-year) at an annual rate of 1.2% according to the second preliminary figures announced by the Cabinet Office. The number was ajusted upwards over the first preliminary figure. Capital investments in the privates sector was modified from 0.9% to 2.0%, and together with healthy export figures, was able to outbalance the decline in housing and public sector investments and reflects a continued gradual recovery.

However, the domestic production of telecom equipment showed a significant decline in Q3, with low capital investments in domestic facilities,  continuing relocation of manufacturing to overseas locations and competition from foreign brands, all leading to the 7th consecutive negative YoY growth in the quarter since 2015 Q1. Exports decreased for the 4th straight quarter with the weaker yen from November, 2016 not enough to offset negative factors. An uptake in domestic demand for mobile phones and base stations pushed growth into positive figures for the first time since 2015 Q2.

I. Domestic Production

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

(1) FY2016 Q3 actual

The total value of production was 158.5 billion yen, or negative 12.7% growth over the same quarter in FY2015. Signs of upgrade demand for enterprise telephone system were seen in the positive YoY growth. Domestic production of mobile phones and network equipment declined with the shift to production overseas and fierce competition from foreign brands.

The aggregate figure from Q1 through Q3 was 437.3 billion yen (-15.7% over the same period of the previous year).

(2) Trend by categories

Actual figures by categories were as follows:

1. Wireline terminal equipment
   15.3 billion yen (+3.8% over the same quarter of the previous year). Of which telephone sets was 700 million yen (-2.4% over the same quarter of the previous year) and key telephones 5.6 billion yen (+12.0% over the same quarter of the previous year), intercoms 8.7 billion yen (+1.0% over the same quarter of the previous year) and facsimiles 400 million yen (-23.1% over the same quarter of the previous year). Key telephone figures were supported by upgrade demand, but the unit prices are trending downward.
2. Mobile terminal equipment
   54.5 billion yen (-15.9% over the same quarter of the previous year). Of which mobile phones was 38.3 billion yen (-26.3% over the same quarter of the previous year) and public-use PHS 300 million yen (-30.1% over the same quarter of the previous year). There was a rebound in demand after consumers held back in the first half of the year with the end to ¥0 (carrier subsidized) mobile phones, but domestic production showed a large drop, with most of the demand taken by imports.
3. Wireline network equipment
   34.5 billion yen (-9.2% over the same quarter of the previous year). Of which central office switching systems was 2.1 billion yen (-22.2% over the same quarter of the previous year), PBX was 4.8 billion yen (-1.6% over the same quarter of the previous year) and digital transmission equipment was 11.2 billion yen (+5.7% over the same quarter of the previous year) and other transmission equipment was 14.6 billion yen (-16.8% over the same quarter of the previous year). Central office switching systems saw a large drop as public switched telephone networks (PSTN) continued to migrate to IP networks, and PBX demand remained flat, but new installment and replacement demand are expected to pick up. Digital transmission equipment showed positive growth for the quarter, but it is expected to revert to negative figures with an end to the investment cycle.
4. Wireless network equipment
   38.6 billion yen (-19.5% over the same quarter of the previous year). Of which fixed telecommunication devices was 10.4 billion yen (-30.3ver the same quarter of the previous year) and base station equipment was 28.1 billion yen (-14.5% over the same quarter of the previous year). Infrastructure investments, including base stations, are increasing in order to accommodate rising data traffic, but the high share of imports led to a drop in domestic production.
5. Network access equipment
   9.0 billion yen (-5.9% over the same quarter of the previous year). Traffic growth from cloud services and IoT is leading to upgrades and increased capital investments, pushing domestic production and total value of equipment upwards.
6. Wireline parts
   6.6 billion yen (+0.3% over the same quarter of the previous year). Mobile phone production in China slowed in the first half, but healthy production of new advanced feature models in the second half resulted in growth of wireline parts for exports.

II. Exports

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

(1) FY2016 Q3 actual

The total figure for exports was 128.7 billion yen (-23.1% over the same quarter of the previous year), recording the 4th consecutive quarter of decrease starting in Q4 of 2015. Telephone sets and terminal equipment continued to record negative year-over-year growth, in addition to the drop in mobile phones all leading to the total negative figure. In network equipment, base stations continued healthy growth from Q1, but two consecutive months of large drops in data communication equipment pushed the entire category into negative growth over the same quarter of the previous year. Increased production of mobile phones in China is contributing to push the total value of parts back to previous levels, but not enough to bring it to that of a year ago.

The aggregate figure from Q1 through Q3 was 348.9 billion yen (-21.9% over the same period of the previous year).

(2) Trend by categories

Actual figures by category are as follows:

1. Telephone sets and terminal equipment 900 million yen (-38.8% over the same quarter of the previous year)
   Of which, mobile phones was 300 million yen (-35.8% over the same quarter of the previous year), facsimiles was 30 million yen (-64.1% over the same quarter of the previous year), cordless handsets for landline phones was 70 million yen (-15.9% over the same quarter of the previous year) and other was 500 million yen (-40.1% over the same quarter of the previous year).
2. Network equipment 38.3 billion yen (-22.2% over the same quarter of the previous year)
   Of which, base stations was 2.5 billion yen (+5.6% over the same quarter of the previous year), data communication equipment was 34.6 billion yen (-23.8% over the same quarter of the previous year) and other network equipment was 1.1 billion yen (-19.3% over the same quarter of the previous year).
3. Parts (both wireline and wireless) 89.5 billion yen (-23.3% over the same quarter of the previous year)

(3) Actual figures by region

By region, Asia was 100.4 billion yen (-21.9% over the same quarter of the previous year), of which China was 63.0 billion yen (-33.1% over the same quarter of the previous year). North America was 16.2 billion yen (-27.0% over the same quarter of the previous year), of which the U.S. was 15.9 billion yen (-27.7% over the same quarter of the previous year). Europe was 9.3 billion yen (-11.3% over the same quarter of the previous year), of which the EU was 8.2 billion yen (-12.9% over the same quarter of the previous year). The export of parts to China was 57.8 billion yen, accounting for 91.8% (90.3% in Q1) of the 63.0 billion yen total exports to China and 64.6% (63.1% in Q1) of 69.6 billion yen total exports of parts – all indicating high dependency on exports of mobile phone parts to China.

(4) Comparison and breakdown by regions

III. Imports

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

(1) FY2016 Q3 actual

The total figure for exports was 783.0 billion yen (+2.1% over the same quarter of the previous year), recording the first positive quarterly growth since the second quarter of FY2015. The demand for mobile phones, which makes up 66.4% of total imports, shows signs of rebounding after the large drop in the first half of the year plus domestic demand for base stations recorded 641.1% positive growth with the surge in infrastructure investments.
The aggregate figure from Q1 through Q3 was 1.932 trillion yen (-7.4% over the same period of the previous year).

(2) Trend by categories

Actual figures by category are as follows:

1. Telephone sets and terminal equipment 524.9 billion yen (+0.9% over the same quarter of the previous year)
   Of which, mobile phones was 520.3 billion yen (+1.0% over the same quarter of the previous year), facsimiles was 1.5 billion yen (+7.9% over the same quarter of the previous year), cordless handsets for landline phones was 1.5 billion yen (-12.3% over the same quarter of the previous year) and other was 1.6 billion yen (-16.7% over the same quarter of the previous year).
2. Network equipment 171.3 billion yen (+4.2% over the same quarter of the previous year)
   Of which, base stations was 15.4 billion yen (+641.1% over the same quarter of the previous year), data communication equipment was 151.3 billion yen (-3.3% over the same quarter of the previous year) and other network equipment was 4.6 billion yen (-20.8% over the same quarter of the previous year).
3. Parts (both wireline and wireless) 86.9 billion yen (+5.7% over the same quarter of the previous year)

(3) Actual figures by region

By region, Asia was 743.0 billion yen (+2.6% over the same quarter of the previous year), of which China was 643.9 billion yen (-0.9% over the same quarter of the previous year). North America was 18.8 billion yen (-11.1% over the same quarter of the previous year), of which the U.S. accounted for 18.1 billion yen (-9.7% over the same quarter of the previous year). Europe was 9.4 billion yen (-11.7% over the same quarter of the previous year), of which the EU was 9.3 billion yen (-11.3% over the same quarter of the previous year). Mobile phones from China amounted to 487.6 billion yen, which accounts for 93.7% of the total figure for mobile phone imports, which was 520.3 billion yen.

(4) Comparison and breakdown by regions

IV. Trends in Orders Received and Shipped

(from CIAJ statistics)

CIAJ statistics for total orders received and shipped amounted to 513.4 billion yen (-0.2% over the same quarter of the previous year) for the quarter.

VoIP-GW, intercoms, multi-functioning personal facsimiles, other mobile terminal equipment, media converters, terrestrial fixed communication equipment (for satellite), base stations and other network equipment (routers, LAN switches) recorded positive growth over the same quarter of the previous year

The total value of domestic shipments was 409.7 billion yen (+1.2% over the same quarter of the previous year) and exports was 103.7 billion yen (-5.2% over the same quarter of the previous year).

For details, contact

Market Research
CIAJ
tel: 81-3-5403-9356 fax: 81-3-5403-9360

For more general inquiries, contact

Corporate Communications
CIAJ
tel: 81-3-5403-9351 fax: 81-3-5403-9360