The Hidden Power of Japanese Industry

Apple's iPhones are made in China, at a plant owned by Taiwanese company Foxconn Electronics in Shenzen, Guangdong Province. It costs around US$179 to produce a single iPhone, but Foxconn makes just $6.50. Most of the money goes to Japanese, German, Korean and U.S. companies that produce the components and materials used in the iPhone. And Japanese businesses make the highest profit of $60.

Until the 1990s, the home appliance sections of U.S. department stores were filled with Japanese products, but in 2000 products from Korean, Chinese and Taiwanese home appliance manufacturers began to pour in. Now, Samsung Electronics' operating profit is larger than those of Japan's nine leading electronics companies including Sony and Panasonic combined. Japanese IT companies now account for less than 25 percent of the global market for electronics products.

But a peek inside cutting-edge products like the iPhone tells a different story. Japanese manufacturers still account for 66 percent of the market for core components and materials like glass, metals and films that go into cutting-edge electronics. Asahi Glass takes up 80 percent of the global market for glass plates used in plasma display panels, while Sumitomo Metal Industries accounts for 90 percent of the world market for plated circuit boards for LCDs and Japan's Zeon occupies almost 90 percent of the market for camera lens materials. Japanese companies have a near-monopoly in many key industries.

Mitsubishi Gas Chemical has halted production at two of its plants after the devastating earthquake and tsunami, causing huge ripple effects in the global IT industry. MGC produces bismaleimide triazine resin, a key material in manufacturing smartphones and tablet PCs. Japan controls 90 percent of the global market for BT resin, and half of that comes from MGC. If the freeze at MGC drags on, global production of smartphones would fall by half and the same goes for tablet PCs such as the iPad.

Automobile production is also being impacted. U.S. automaker GM has decided to halt production at its Louisiana plant for a week, Renault Samsung in Korea started cutting down production volume, and European carmakers are bracing themselves for a potential impact, because it is becoming increasingly difficult to procure Japanese-made components for engines and transmission systems.

The so-called tsunami effect on global parts supply from the Japanese earthquake is expected to spread to the shipbuilding and aerospace industries as well. The future direction of the global economy will depend on how quickly Japan recovers from the disaster.

By Chosun Ilbo columnist Kim Ki-cheon

englishnews@chosun.com / Mar. 21, 2011 12:54 KST