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Telecommunication Equipment Production and Trade Figures for FY2019 as of QIII (October – December) of 2019 - Strong performance of mobile terminal equipment and wireline network equipment results in domestic production growth for the second consecutive quarter –

The Communication and Information Network Association of Japan (CIAJ) announces the telecommunication equipment and trade figures for October through December 2019 as follows.

I. Overview

For the period from October through December 2019, the Japanese economy showed its first negative growth in five quarters, with a real GDP growth rate of negative 7.1 percent according to the second provisional estimates published on March 9. Consumer spending plunged in reaction to the last-minute demand before the consumption tax hike. Capital investment fell among telecommunication manufacturers and manufacturers of transportation machinery and others, following weak demand for labor saving solutions to address the labor shortage and for the construction of office buildings and others. Exports remained sluggish amid the deceleration of overseas economies.

In this situation, the telecommunication equipment market saw slumping demand for smartphones. It is attributable to a wait-and-see attitude aimed at investigating what the situation will be like after revisions to the Telecommunications Business Act, reaction to last-minute demand and hesitation to make purchases before the release of fifth-generation (5G) mobile terminals. Meanwhile, domestic demand was shifting from backbone wireline network equipment to mobile phone infrastructure equipment such as base stations and routers in a move towards commercial 5G services.

(1) Domestic market trends

For the period from October through December 2019, the size of the domestic market (= value of domestic production – value of exports + value of imports, excluding parts) amounted to 820.8 billion yen, down 14.9% year-on-year. It is due mainly to the impact of the decline in total imports.
The cumulative total market size from April through December was 2,016.6 billion yen, down 7.1% year-on-year.

(2) Domestic production

Domestic production for the October-December period reached 116.5 billion yen, up 7.8% year-on-year. The two consecutive quarters of growth is the result of an increase in mobile phones produced in the country and from the strong performance of wireline network equipment. In cumulative total from April to December, the figure stood at 328.9 billion yen, up 7.0% year-on-year.

(3) Exports

Total exports for the October-December period stood at 80.2 billion yen, down 24.7% year-on-year, showing a considerable fall for the eighth consecutive quarter. Smartphone production slumped in Asian emerging economies. Accordingly, exports of parts for production continued to shrink. While overseas economies stay stagnant, exports of digital transmission equipment grew in preparation for a hike in data traffic. In total from April to December, the figure slid by 24.6% year-on-year to 237.6 billion yen.

(4) Imports

Total imports for the October-December period were 802.9 billion yen, down 17.1% year-on-year, to mark a decline for the second consecutive quarter. Weak domestic demand for smartphones led to a massive decline in imports of smartphones produced overseas by Japanese manufacturers and those manufactured by overseas manufacturers. Imports of mobile phone infrastructure equipment, such as base stations and routers, surged to replace equipment in the “other (transmission systems, communication systems, modulators and demodulators)” category, imports of which used to be on the rise. In total from April to December, the figure stood at 1,973.1 billion yen, down 9.5% year-on-year.

II. Domestic Market Trends

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

(1) Trend by category

Actual figures by category for October through December were as follows.

The size of the domestic market, including the value of imports of foreign brands, was calculated from the Current Production Statistics and the Trade Statistics of Japan in according with the following formula:
Domestic market size = value of domestic production – value of exports + value of import

  1. Terminal equipment: 592.0 billion yen (down 20.7% compared with the same quarter of the previous year)

  2. Network equipment: 228.9 billion yen (up 4.7% over the same quarter of the previous year)

III. Domestic Production

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

(1) Trend by category

Actual figures by category for October through December were as follows.

  1. Wireline terminal equipment

    Domestic production in this category amounted to 12.4 billion yen, down 10.0% year-on-year, to which fixed telephone sets contributed 0.5 billion yen, down 40.6% year-on-year, key telephones 3.4 billion yen, down 14.1% year-on-year, and intercoms 8.5 billion yen, down 0.6% year-on-year. The downward trends of equipment for home use and for business use followed the weakness in consumer spending and in corporate capital investment.

  2. Mobile terminal equipment

    Domestic production in this category was 41.2 billion yen, up 41.3% year-on-year. Among others, that of mobile phones, including public-use PHS handsets, soared 60.9% year-on-year to 25.7 billion yen. Mobile phones, wireless systems for business use and other ground mobile communication equipment produced in Japan grew at the same rate.

  3. Wireline network equipment

    Domestic production in this category amounted to 34.3 billion yen, up 15.1% year-on-year, to which central office switching systems contributed 2.9 billion yen, up 65.9% year-on-year, private branch exchanges (PBXs) 1.2 billion yen, down 38.4% year-on-year, digital transmission equipment 12.0 billion yen, up 23.5% year-on-year, and other transmission equipment 16.2 billion yen, up 11.8% year-on-year. Among the central office switching systems, demand increased for conversion systems, which are essential to transition from the public switched telephone network (PSTN) to the Internet protocol (IP) network. Production of PBXs is on the decrease due to integration and abolition of corporate bases and a decrease in lines following fixed-mobile convergence (FMC). As for digital transmission equipment, domestic production and exports continued to rise on the basis of investments by telecommunication carriers in metropolitan area networks in response to growing data traffic.

  4. Wireless network equipment

    Domestic production in this category stood at 12.8 billion yen, down 29.8% year-on-year, to which fixed telecommunication devices contributed 6.5 billion yen, down 24.8% year-on-year, and base station equipment 6.3 billion yen, down 34.3% year-on-year. Demand is climbing for stationary satellite communication systems for governmental usages. Domestic demand for mobile phone infrastructure equipment started to expand in preparation for commercial 5G services, but domestic production was weak since overseas manufacturers had significant advantages.

  5. Network connection equipment

    Domestic production in this category was 9.2 billion yen, down 5.1% year-on-year. Demand used to be on the increase for the purposes of system enhancement for commercial 5G services, rising data traffic due to video distribution services, and improvement of working environments amid work style reforms. However, it tumbled after consumer sentiment deteriorated due to the tax increase.

  6. Wireline parts (including relay equipment for wireline systems)

    Domestic production in this category stood at 6.6 billion yen, down 10.9% year-on-year. A decrease in exports of parts for smartphone manufacturing in emerging economies kept production of parts on the decrease.

IV. Export

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

(1) Trend by category

Actual figures by category from October through December were as follows.

  1. Telephone sets and terminal equipment: 5.7 billion yen (down 39.1% compared to the same quarter of the previous year)

    The above figure includes mobile phones worth 4.9 billion yen, down 43.5% year-on-year, cordless handsets for landline phones worth 0.07 billion yen, up 19.7% year-on-year, and others worth 0.7 billion yen, up 25.8% year-on-year. Mobile phone exports to the United States had been falling since the second quarter of FY2019.

  2. Network equipment: 33.6 billion yen (down 0.5% compared to the same quarter of the previous year)

    The above figure includes base stations worth 0.8 billion yen, down 33.5% year-on-year, data communication equipment worth 32.0 billion yen, up 1.1% year-on-year, and other network equipment worth 0.8 billion yen, down 13.2% year-on-year. Demand for data communication equipment continued to shrink amid slumping overseas economies whereas digital transmission equipment enjoyed strong demand. As a result, total exports in data communication equipment surged.

  3. Parts (for wireline and wireless equipment): 40.9 billion yen (down 35.5% compared to the same quarter of the previous year)

    In China, smartphone production peaked out. The ratio of exports of parts to that country to total parts exports was then 30% or less while it exceeded 60% around 2016. This had a huge impact on the continued decline in exports of parts.

(2) Trend by region of destination

For the period from October through December, exports to Asia amounted to 46.1 billion yen, down 33.2% year-on-year, including those to China worth 15.1 billion yen, down 56.0% year-on-year. Exports to North America were 18.5 billion yen, down 22.7% year-on-year, including those to United States standing at 18.2 billion yen, down 22.6% year-on-year. Exports to Europe reached 11.2 billion yen, up 14.4% year-on-year, including those to the European Union amounting to 8.5 billion yen, up 0.1% year-on-year. The share of exports to China in the total exports further dropped to 18.8% for reason of trade issues and the stagnant smartphone demand.

The percentage of exports to China in total exports decreased further to 21.1% due to trade issues and a slowdown in growth in demand for smartphones.

(3) Share by region of destination

First:Asia57.4% (down 7.3 percentage points compared to the same quarter of the previous year)
Second:North America23.1% (up 0.6 percentage points over the same quarter of the previous year)
Third:Europe14.0% (up 4.8 percentage points over the same quarter of the previous year)
Rest of the world5.5% (up 1.9 percentage points over the same quarter of the previous year)

V. Imports

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

(1) Trend by category

Actual figures by category from October through December were as follows.

  1. Telephone sets and terminal equipment: 544.1 billion yen (down 23.6% compared to the same quarter of the previous year)

    The above figure includes mobile phones worth 541.3 billion yen, down 23.7% year-on-year, cordless handsets for landline phones worth 1.2 billion yen, down 9.9% year-on-year, and others worth 1.6 billion yen, down 8.3% year-on-year. Slowdown in domestic smartphone demand led to a massive decline in imports of smartphones produced overseas by Japanese manufacturers and of those from overseas manufacturers.

  2. Network equipment: 206.2 billion yen (up 5.9% over the same quarter of the previous year)

    The above figure includes base stations worth 19.1 billion yen, up 33.9% year-on-year, data communication equipment worth 182.0 billion yen, up 4.8% year-on-year, and other network equipment worth 5.1 billion yen, down 24.2% year-on-year. In preparation for commercial 5G services in Japan, imports of base stations, switching and routing systems in the category of data communication equipment and other mobile phone infrastructure equipment increased.

  3. Parts (for wireline and wireless equipment): 52.7 billion yen (down 13.4% compared to the same quarter of the previous year)

(2) Trend by region of origin

For the period from October through December, imports from Asia amounted to 762.6 billion yen, down 17.4% year-on-year, including those from China of 618.3 billion, down 19.0% year-on-year. Imports from North America stood at 15.7 billion yen, down 17.2% year-on-year, including those from the United States worth 14.5 billion yen, down 17.7% year-on-year. Imports from Europe were 14.4 billion yen, up 8.6% year-on-year, including those from the European Union amounting to 14.2 billion yen, up 9.7% year-on-year.

Imports of base stations increased from Asia and from Europe.

(3) Share by region of origin

First:Asia95.0% (down 0.4 percentage points compared to the same quarter of the previous year)
Second:North America2.0% (unchanged from the same quarter of the previous year)
Third:Europe1.8% (up 0.4 percentage points over the same quarter of the previous year)
Rest of the world1.3% (unchanged from the same quarter of the previous year)

VI. Trends in Orders Received and Shipped

(1) Actual figures for QIII

According to the CIAJ independent statistics, orders received and shipped from October through December totaled 362.3 billion yen, down 6.4% from the same period a year earlier. They comprised domestic shipments of 285.4 billion yen, down 4.9% year-on-year and exports of 76.9 billion yen, down 11.3% year-on-year.
Orders received and shipped from April through December totaled 1,115.0 billion yen, down 0.3% year-on-year, comprising domestic shipments of 884.0 billion yen, up 3.4% year-on-year and exports of 231.0 billion yen, down 12.3% year-on-year.

*Orders received and shipped according the CIAJ independent statistics represent the amount of orders received and shipped by domestic manufacturers with CIAJ memberships.
(= domestic shipments (domestic production + overseas production) + exports = domestic production + imports from overseas production.)

(2) Trend by category

Actual figures by category from October through December were as follows.

  1. Wireline terminal equipment: 129.2 billion yen (down 3.7% compared to the same quarter of the previous year)

    Despite strong domestic demand for telephone sets, cordless handsets for landline phones and intercoms, a decline in exports of office-use facsimiles, including multi-functioning devices for office use) after the slowdown of overseas economies had a greater impact. Orders received and shipped in this whole category dropped from the same period a year earlier.

  2. Mobile terminal equipment: 127.1 (down 10.8% compared to the same quarter of the previous year)

    The decrease of this figure is due to a shrinkage in mobile phone shipment quantity mainly due to the revision to the Telecommunications Business Act and to a drop in unit terminal prices amid consumers’ shift from high-end to mid-range models, despite brisk domestic demand and exports for other mobile terminal equipment including business radios.

  3. Wireline network equipment: 49.5 billion yen (up 7.5% over the same quarter of the previous year)

    Orders received and shipped remained almost flat in Japan with regard to key telephones and electronic PBXs. Both domestic demand and exports of digital transmission equipment were bullish. Passive optical network (PON) devices, such as optical network units and optical line terminals, enjoyed high domestic demand. The figure for this whole category attained a year-over-year rise.

  4. Wireless network equipment: 39.9 billion yen (down 13.2% compared to the same quarter of the previous year)

    While demand considerably grew for stationary satellite communication systems for governmental usages, that for base stations and stationary ground communication systems was weak. The figure for the entire category fell from the same period of the preceding year.

  5. Other network equipment: 9.9 billion yen (up 3.7% over the same quarter of the previous year)

    The year-on-year growth in this figure was the result of brisk demand for routers and LAN switches.

  6. Communication equipment parts: 6.7 billion yen (down 22.2% compared to the same quarter of the previous year)

VII. Domestic Production, Imports and Exports for Calendar Year 2019

(1) Domestic market trend for calendar year 2019

The size of the domestic market stood at 2,714.8 million yen for the period from January through December 2019, down 7.0% from the previous year. Main factors that led to the decline include a huge slide in mobile phone demand following the terminal purchase guidelines and a trend similar to that in 2016, in which there was a conservative attitude towards capital investment amid the yen appreciation.

(2) Domestic production for calendar year 2019

Domestic production from January to December 2019 stood at 450.6 billion yen, down 1.4% from the previous year. Domestic production of wireline network equipment, such as digital transmission equipment and switching systems, and network equipment including routers and LAN switches showed a year-over-year hike due to bullish demand for them. Domestic demand for intercoms and marine and aeronautical radio communication equipment also grew year-on-year. Meanwhile, weak domestic production was recorded for wireless network equipment for commercial 5G services.

(3) Exports for calendar year 2019

Exports from January through December 2019 stood at 319.9 billion yen, down 25.2% from the previous year. Mobile phone exports attained a year-on-year surge, as they showed an upward trend until the first half of 2019. However, exports of most products tumbled from the preceding year. Among others, exports of parts plunged significantly as a result of a slump in overseas economies.

(4) Imports for calendar year 2019

Imports for January through December 2019 stood at 2,645.7 billion yen, down 8.6% from the previous year. Whereas imports of data communication equipment and base stations grew from the previous year amid brisk demand for digital transmission equipment and others, imports of mobile phones, which account for a large proportion of the total imports, dropped considerably from the preceding year due to stagnating domestic demand.