Most people who own an iPhone, a Prius or a Nintendo Wii have never heard of Porite, but this small company outside Tokyo makes a crucial part of their toys’ vital organs.
Despite the ubiquity of the tiny copper bearings Porite churns out by the millions each day, orders all but dried up in September. Now shipments are down about 40 percent from last year, as consumers in the US and elsewhere rein in spending on sophisticated electronics.
With little to do, the company’s 400 employees spend their days sweeping and cleaning, and about a dozen contract workers have been let go.
The finance ministry announced on Wednesday that exports from Japan, the world’s second-largest economy, fell by a record 49 percent last month compared with a year earlier. It was the fifth consecutive month that exports have fallen. Shipments to the US fell 58 percent. Japan’s trade surplus was down 91 percent, to ¥82.4 billion (US$840 million).
Although the Japanese brands known worldwide have received more attention in the news, the bulk of the problems affecting Japan’s exporters are not at Toyota or Sony, both of which predict deep losses this year, but at small and midsize companies like Porite.
In a shift often overlooked even inside Japan, these virtual unknowns now account for about 75 percent of Japan’s manufacturing output and employ almost 90 percent of the sector’s workers.
In part because of the export slump, the country’s economy was 12.1 percent smaller in the last three months of last year than in the period a year earlier, putting Japan on course for its deepest, longest decline since World War II.
“Japan has taken a disproportionate hit in the economic downturn,” says Yasuo Yamamoto, senior economist at the consulting firm Mizuho Research Institute. “Japan’s exports are concentrated in the very sectors that have been hit the most in the economic crisis, like cars and electronics.”
Porite is an example of an increasingly important group of Japanese exporters that have found a niche in making the advanced inputs — like tiny bearings and micron-thin films and wafers — that make other companies’ products tick. Streamlined and focused, they bear little resemblance to the conglomerates that have long dominated Japanese industry.
“Because these companies aren’t household names, their emergence has been easy to overlook,” said Ulrike Schaede, a professor at the University of California, San Diego.
In fact, division of labor is developing on a large scale in Asia. Take the laptop, for example: Japan exports advanced materials and machinery tools to Taiwan and South Korea, which make microchips and other intermediate products to export to China, which puts together laptops to ship to the US.
Similarly, almost 75 percent of the parts that make up semiconductors are made in Japan, though the semiconductors themselves may be manufactured elsewhere, estimates by the Japanese trade ministry showed.
But that has made Japan’s export industries especially vulnerable to the global downturn. On top of a fall in direct exports to the US, Japan is exporting less to other Asian manufacturing centers like China, Taiwan and South Korea, as companies there scale back production.
Moreover, exports have been growing in importance for Japan. Overseas shipments have surged in recent years, fueled by a huge appetite for Japanese cars and gadgets among consumers in the US and elsewhere, while the domestic economy has stagnated.
Last year, exports made up 15.9 percent of Japan’s GDP, up from 9.8 percent a decade ago.
Even small companies like Porite rode the wave of globalization, opening factories in Taiwan, Singapore, Malaysia and Thailand — and, in 2002, Jefferson City, Missouri. Now, more than 70 percent of Porite’s sales come from outside Japan.
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