Japan: Insights from KPMG’s 2016 Global Manufacturing Outlook

Japan: KPMG’s 2016 Global Manufacturing Outlook

Jun Okamoto, a Director with KPMG’s Japan Strategy Group, provides a perspective on the challenges and opportunities facing Japanese manufacturers.

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Key Japan data points from KPMG’s 2016 Global Manufacturing Outlook

  • 41 percent of respondents from Japan say their growth strategy will be ‘very aggressive’ versus 18 percent globally
  • 32 percent will change the range of products they offer over the next 2 years
  • 24 percent will spend more than 10 percent of revenues on R&D over the next 2 years.

Insights on the Japan market from Jun Okamoto, a Director with KPMG’s Japan Strategy Group

As low-cost electronic manufacturing service (EMS) providers based in Asia start to chip away at Japan’s global competitiveness in electronics manufacturing, Japan’s manufacturers have increasingly started to focus on creating a more targeted and concentrated business portfolio.

For some, this will mean sharpening the focus onto one distinct point solution, incorporating both hardware and software to create a more valuable end-to-end solution. For others, the focus will be on leveraging their existing capabilities and technologies to specialize in high-value manufacturing.

Both business models will require Japanese manufacturers to accelerate their investment into Information and Communications Technology (ICT). The fact that almost a quarter of Japan’s manufacturers say they will spend more than 10 percent of revenues on R&D over the next 2 years is an encouraging sign. The recent launch of the ‘Industrial Value Chain Initiative’ in 2015 should help Japan’s manufacturers respond to similar initiatives (such as Industry 4.0 from Germany) and rebuild their global competitiveness.

Japan’s manufacturers are also adapting their approach to innovation. Some have started to actively relocate their R&D functions and facilities outside of Japan in an effort to improve innovation and better respond to the needs of customers in different markets. And many are changing their production methods to move from ‘subtractive manufacturing’ to ‘additive manufacturing’ methods and tools such as 3D printing.

Those seeking to focus on high-value manufacturing will also need to invest in technology – particularly sophisticated technologies that control heat, manage physical force or incorporate optics into their design. And this will likely require them to work with new partners, either through Joint Ventures or through mergers and acquisitions.

Given the historically conservative approach taken by Japan’s manufacturers, it is not surprising that many say they are going to be aggressive in pursuing their growth objectives. Japan’s manufacturers know they need to make significant changes to their business model in order to remain relevant in the global marketplace. And most seem eager to start making those changes now.

Two key questions

Q: What is the greatest threat to growth for manufacturers in Japan today?

Jun: Disruption by new competitors.


Q: What are Japanese companies doing differently do drive growth?

Jun: Focusing on detail to drive differentiation.

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