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Japan avoids machinery hit

By: Steve Toloken

November 20, 2012

DONGGUAN, CHINA (Nov. 20, 1:50 p.m. ET) — Japan’s large plastics machinery industry, which has become increasingly dependent on the mainland Chinese market, has thus far avoided the big drop in sales seen by Japanese car makers in the wake of anti-Japan protests in September.

Still, some non-Japanese suppliers are watching to see if they can get more business in China’s growing market for all-electric presses, a sector in the past dominated by the Japanese. 

Executives for large Japanese machinery makers interviewed at a recent trade show in China said that a more diversified sales base has helped them avoid problems similar to the 40 percent-plus drop in vehicle sales that Toyota Motor Corp. had in China in September and October.

Many Chinese cities erupted in street protests in September, as part of an ongoing dispute between the two countries over control of a chain of Pacific Ocean islands.

“The impact so far has not been so big,” said Hozumi Yoda, president of press maker Nissei Plastic Industrial Co. Ltd. and chairman of the Tokyo-based Association of Japan Plastics Machinery, in an interview at the 14th Dongguan International Plastics, Packaging and Rubber Exhibition, or DMP trade fair, held Nov. 14-17.

Yoda and other executives pointed to several factors, including stability in China’s overall auto market, and that they sell equipment to non-Japanese companies in China. Japanese car makers account for about 16 percent of the 18 million vehicles sold in China each year, he said.

As well, the Japanese executives noted that other industries they serve, like mobile phones and tablet computers, have not been hit like the car industry.

“Generally we have some effect from the political situation but not so much,” said Shoji Yonezawa, chairman, general manager and North Asia leader for SHI Plastics Machinery (Shanghai) Co. Ltd., part of Japanese-German press giant Sumitomo (SHI) Demag. “Everybody asks the same question.”

He said Japanese components and technology are used to make mobile phones and computers for Apple, Samsung and other non-Japanese brands.

For example, large Taiwanese manufacturer Foxconn, which makes Apple’s iPhone and other IT products at huge factories in mainland China, is a good-sized customer of Sumitomo, he said.

Taiwanese companies in China account for about 40 percent of Sumitomo’s market there, a bigger share than Japanese firms in China, he said.

Still, some non-Japanese equipment suppliers said fallout from the politics may provide opportunities.

On a recent week-long visit to 20 customers in South China, where Japanese auto makers have assembly plants, 14 of those Chinese companies said they would not buy Japanese brand machinery if they had a choice, said Toni Bernards, general manager of Milacron Plastics Machinery (Jiangyin) Co. Ltd., a unit of U.S.-based Milacron LLC.

“This gives me a chance to increase my market share,” said Bernards, although he acknowledged in an interview at Milacron’s booth at DMP that it was too soon to say how much purchasing habits would change.

Privately, executives at some other non-Japanese suppliers at the fair echoed Bernards in saying it could be an opportunity.

Milacron is increasing its bets on China, planning investments to double production space at its factory in Jiangyin by May, although that’s because of general growth in the country, he said.

At DMP, the company made its China introduction of its second-generation all-electric Elektron machines with an improved control panel, and it plans to introduce its largest in that line, a 550-ton version, in the second quarter of 2013, he said.

Bernards said a few years ago, Japanese firms had 90 percent of the all-electric market in China, but that’s changing as local firms develop their own electrics and foreign suppliers introduce Chinese-made models. Milacron started making all-electrics in Jiangyin in 2009, for example, he said.

Even if the effects have not filtered through to Japanese plastics equipment makers, Japanese auto parts makers in China who would buy molding machines have been hurt, with some operating at 50 percent capacity, said Nissei’s Yoda.

In addition to Toyota’s more than 40 percent drop in China sales since the September protests, Nissan Motor Co. reported declines in China sales of at least 35 percent in September and October.

An executive with the Hong Kong office of Japan’s JSW Plastics Machinery (HK) Ltd., Akihiro Shimatani, agreed with his Japanese colleagues in saying that the impact was small for the machinery industry.

He said in his experience with molding companies in South China, what’s most important is the price, not the country the machine is from.

The China head of Austrian equipment supplier Wittmann Battenfeld GmbH, Jonathan Ching, does not think political issues will have a long-term impact on how companies made purchasing decisions for large capital investments like molding machines.

The bigger problem for Japanese firms is the slowing economy in Japan and worldwide, said Yoda. Japan’s economy contracted 3.5 percent in the third quarter, although Japan’s press industry is on target to manufacture slightly more machines this year than last.

The industry will likely make about 12,000 injection machines in Japan this year, compared with about 11,500 last year, although he said the market looks more uncertain in 2013.

Still, Nissei also announced plans at the fair to build a second manufacturing plant in China, joining other Japanese machinery firms that have been making sizable investments in China and Southeast Asia in recent years.