A focus on manufacturing is probably why Japan is winning design-ins with Apple.
If you’re a U.S. longtime component vendor, you remember with a certain twinge in your stomach the technology and market-share battles with Japan in the 1980s.
For a while, it looked like the Japanese were not just eating part of our lunch; they were going to eat the whole thing. But then—maybe due to an innovation shift that sped disaggregation or maybe due to protectionist saber-rattling (see the SIA) or maybe due to other factors too—it stopped.
The 1990s saw the United States consistently win back semiconductor market share. Japan fell into a long declined and the rest is history.
Well, a funny thing happened on the way to writing the history books. Japanese components vendors are back eating your lunch again.
That’s what I gleaned from reading a Nomura Japanese Equity research report recently that analyzed the iPhone 4 design.
While you’ve no doubt read tear downs, including ours from UBM TechInsights, this particular analysis dives into
Ultra-small passive components
Ceramic packages for camera modules
Noise suppression components.
“Considering that the companies that are able to supply custom components and parts with the characteristics that are used in smart phones (e.g., 0402-size parts, ceramic packages) are limited to some of the
top manufacturers, we think almost all Japanese component makers are the suppliers with the
exception of assembly-related parts,” wrote authors Manabu Akizuki and Yujiro Nishibori in the Nomura analysis.
“For Japanese component makers, their growing presence as suppliers for key products such as the iPhone 4 is a positive development that has helped differentiate them from other Asian manufacturers,” they wrote.
While Apple is ferociously secretive about its suppliers, the authors suggest companies and potential iPhone 4 design wins:
Filters, duplexers, antenna switches, band pass filters: Murata and TDK-EPS
“At present, only Japanese and a few U.S. companies are able to propose innovative electronic components, meaning that many Japanese makers have a high global market share. Such companies have sufficient capabilities and production capacity to supply parts for products such as the iPhone 4, which require a rapid startup of volume production at the time of new model launches, followed by the winding down of production as sales taper off."
The point of this post isn’t to shame U.S. vendors but to illuminate what I think is a core lesson companies may be learning after the past 30 years of disaggregation—namely, it’s not always permanently good.
Harvard Business School professor Gary Pisano (pictured) in fact has spent time in Ivy-covered walls studying one facet of this: the effect owned manufacturing has on product innovation.
While the complex logic vendors have pointed to Moore's Law and escalating costs as the reason they've gone fabless, most U.S. components vendors still own their own manufacturing.
But consider the cultural implications in Japan, where companies across the electronics-sophistication spectrum have kept their manufacturing.
Is it the reason they’re winning hearts and minds and iPhone 4 design ins?