Japan's seven electronic parts and components companies will see profit growth in fiscal 2021

Japanese electronics component companies reported strong results. The net profits of all seven large companies in fiscal 2021 (ending March 2022) were higher than the previous fiscal year. In the background of electric car, product negotiation is flourishing and price reduction is reduced. In addition, the depreciation of the yen has also become a factor. However, the outlook for China, the largest market, is uncertain and the gap between companies is likely to widen.

Japan's seven electronic parts and components companies will see profit growth in fiscal 2021
On May 11, TDK released its consolidated financial results (US accounting standards) for fiscal 2021, showing a 2.2 times increase in net profit to 177.5 billion yen. Other companies also posted big profit gains. In addition to TDK, Murata, Nippon Electric corporation and Sunbaiting all posted record profits.

This is due to strong demand in areas such as 5G, the high-speed communications standard. Final product companies are also increasing inventories due to the COVID-19 pandemic. "Demand is expanding as customers increase inventories," said Masato Saito, TDK's president.

Japan's seven electronic parts and components companies will see profit growth in fiscal 2021

In addition, the depreciation of the yen has also become a factor. The average exchange rate was about Y112 to the dollar, about Y6 weaker than in the previous fiscal year, helping to improve export earnings and boost yen earnings. At Murata, for example, the weaker yen boosted operating profit by Y38bn.

But the future is uncertain. Of the seven companies, sunlure and ROM are expected to show a profit decline in FY2022. Profit growth at the other five companies is also expected to slow.

The risk factor is a slowdown in China. Sunlure expects capacitor sales from April to June 2022 to fall by up to 10 percent year-on-year. Tomitsu Fukuda, senior executive director of Sunlure, said, "Logistics chaos caused by the lockdown in Shanghai and other factors are contributing to the decline in profits."

Profitability is starting to diverge. Net profit margins on sales for FY2021 averaged 10% for seven companies, but murata Productions (17%) and Sunbaits (16%) were significantly higher. The two companies have a strong presence in the multi-layer ceramic capacitor (MLCC) segment and are growing sales in areas such as pure electric vehicles (EV).

The average unit price of ceramic capacitors calculated according to the production statistics of Japan's Ministry of Economy, Trade and Industry is expected to keep rising. An electronics parts company said, It is easy for companies to raise prices due to strong demand. Raw material prices can also be passed on more quickly. On the other hand, due to fierce competition with overseas companies, the unit price of common parts rises slowly.

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