Despite the rapidly slowing economy, an army of cranes still moves busily above the archipelago of factories that Sharp is building in the gritty port of Sakai.
The US$10 billion complex, row upon row of hangar-size buildings, will produce up to 13 million liquid-crystal-display TVs a year by 2010.
If consumer demand does not rebound by then — and if prices for flat-panel sets do not stop falling — analysts say the project could end up being little more than the world’s most expensive industrial art installation. But the Japanese TV maker calls it something else: one of the keys to its survival, particularly in hard times.
“We need to take a longer-term view,” said Nobuyuki Sugano, an executive at Sharp. “If other companies slow down spending, we can stay ahead.”
Global companies are battening down the hatches — reducing spending, laying off workers and pulling back on luxuries like research and development and expansion. In the US, many seemed to support letting the automobile industry collapse under the weight of its own lethargy.
Japanese companies are also cutting back — on Dec. 10, Sony announced it would eliminate 8,000 jobs. But, armed with the lessons of their past, many Japanese companies are cutting back less than their competition, investing instead for the day the downturn ends, however long that takes.
“Unless our sales dry up completely, we have to continue investing,” said Kumiko Makino, a spokeswoman for Sanyo Electric, which has refused to cut investment in new battery and solar panel factories. “If we stop, our rivals and competitors will quickly catch up.”
That urgency stems from the bitter lessons of the stagnant 1990s. Japanese companies cut back on development, only to lose ground to hungry Taiwanese and South Korean competitors.
Many economists and industry analysts say Japanese companies have so far maintained higher levels of investments in production, research and development than companies in other countries.
Instead of huge layoffs or cuts in operations, firms are cutting part-time staff members. (Layoffs of full-time workers remain taboo.) They are also delaying or canceling fewer new plants than elsewhere.
One reason is that Japanese companies have war chests of cash built up during Japan’s recovery earlier this decade. Another is that unlike in the US, shareholders lack the power to demand that cash be paid out as dividends. If Japan’s powerful manufacturing sector has a secret to its success, it may be this willingness to reinvest a big share of profits back into new plants and research.
Japan’s drive to build bigger, more advanced factories fueled an industrial construction boom that propelled the economic recovery earlier this decade. It also equipped the nation with the most advanced factory production lines to try to defend its technological lead over the rest of Asia.
“Japan sees its future as more dependent on capex than Americans or Europeans do,” said Robert Feldman, an economist at Morgan Stanley in Japan, using the industry jargon for “capital expenditure,” investment in new factories and equipment.
Innovation grew from necessity, too. Feldman noted that with Japan’s shrinking population, companies are more likely to try to fill the gaps by investing more heavily in labor-saving machinery, like robots.
To be sure, the global slowdown has hammered Japan’s profits and sent its US$5 trillion economy, the world’s largest after the US, into recession. And economists say harder times lie ahead, with the US’ crucial Christmas shopping season looking to be one of the weakest in memory.
Overall, government figures released last month reported that corporate spending on factories and other facilities fell 2 percent in the three months ending in September from the previous quarter, for its third consecutive quarterly decline. The declines were a major factor in Japan’s sliding into recession.
Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs, estimates that such investment will shrink 1.8 percent this year and 2.1 percent next year before growing slowly.
“The pace of the slowdown in capex has been much sharper than we expected,” he said.
Still, Yamakawa and other economists say they expect corporate Japan to keep outspending the US on new factories, even during the current downturn.
Last year Japan spent 16 percent of its GDP on new factories and production, Yamakawa said. While that is down from Japan’s high-growth 1980s, when it spent closer to 25 percent, the figure is still high when compared with 11 percent by the US, he said.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source