Another factory in China is closed! What happened to Murata?

Murata recently announced that its wholly-owned subsidiary Saitama Murata Manufacturing Co., Ltd. will close its production subsidiary located in Longgang, Shenzhen, China, Shenglong Dongguang Technology (Shenzhen) Co., Ltd. (hereinafter referred to as Shenglong Technology) in December 2020.

Source: Murata official website

According to the information on Shenglong Dongguang Technology's recruitment website, the factory is located in Dongguang Electronic Technology Park, No. 8 Gaoke Avenue, Baolong Industrial City, Longgang District, Shenzhen. It has three factory buildings, two dormitory buildings, and employs about 1,500 people. Murata has not yet made a statement on how to relocate the employees after the factory is closed.

Source: Murata official website

Murata's closure of Shenglong Technology was not without warning. This is the third Chinese factory that Murata has closed in the past year. In December 2019, Saitama Murata Manufacturing Co., Ltd. will shut down its two Chinese subsidiaries that produce passive components: Huajian Electronics and Huaju Technology within 2019.

It is reported that Shenglong Technology mainly deals in: coils, electronic ceramics and module products used in mobile phones, laptops, audio systems, and automotive electronic equipment.

Huajian Electronics Co., Ltd. is mainly engaged in: production, processing and after-sales service of medium frequency transformers and other transformers, coils, tuners, filters, coil modules, power supplies, inductors, boost modules, chip inductors and wireless network cards.

Shantou Huaju Technology Co., Ltd. is mainly engaged in: production, processing and after-sales service of multilayer chip inductors.

The reasons given in Murata's three factory closure statements were similar:

In recent years, the business environment has become very severe due to the diversification of demand in major markets such as the smartphone market, shortened development cycles, and intensified competition with overseas manufacturers. Due to the sharp decline in demand for Shenglong Technology's product categories and fierce price competition, it has been decided to stop production and close the company.

Huajian Electronics and Huaju Technology experienced a sharp drop in demand for their product categories and intensified price competition, so they decided to suspend production and close the company.

They all emphasized that the closure of the production subsidiary would have little impact on the company's performance this year.

What is Murata's intention in shutting down three Chinese factories within a year?

Perhaps we can get a clue from the factory closure statement. The factories that Murata closed in China all belong to Saitama Murata Manufacturing, which mainly serves the telecommunications market.

According to incomplete statistics from Xinshiye, between December 2019 and November 2020, Murata announced that it would close a total of four factories, three of which were the Chinese factories mentioned above, and one was the battery base of its subsidiary Tohoku Murata Manufacturing Co., Ltd. in Kanuma City, Tochigi Prefecture, Japan; and a total of five newly completed factories.

Three of the plants in Japan said they would “build a system to meet the mid- to long-term demand for ceramic parts driven by the increasing functionality of electronic devices and the spread of electrification of vehicles .” The new plant in Thailand said it would produce products for mobile devices with ever-improving functions such as smartphones and the increasingly electrified automotive industry . The new plant in Finland said it would “build a system to meet the mid- to long-term demand for sensors in the following areas: the automotive field , including unmanned driving, which is expected to grow in the future , industrial fields such as heavy equipment tilt detection, and healthcare fields such as vital sign measurement.”

Judging from Murata's dynamics of closing factories and opening new ones, competition in the telecommunications market, which is dominated by mobile phones, has become increasingly fierce in recent years. Murata has long lost interest in the fight and has gradually withdrawn from the market in recent years. It has reduced the supply of standard products suitable for the telecommunications market and invested heavily in the development of advanced electronic materials as well as multifunctional and high-density modules. Most of its new products are aimed at the automotive electronics market.

Murata's financial report for April-June 2019 also showed that Murata's sales in the quarter increased by 3.5% year-on-year to 357.5 billion yen. The sales of its main product MLCC declined due to the slowdown in demand for smartphones, but its performance in automotive electronics was relatively outstanding.

Photo: Murata Jiangsu Factory

Source: Murata official website

In this way, it is only natural for Murata to gradually close factories that produce products for the telecommunications market. Murata currently still has four major production bases in China, namely Shenzhen, Foshan, Taiwan, and Wuxi, Jiangsu. According to Qichacha information, Murata's current factories in mainland China are all controlled by Murata or Murata Investment Company as the largest shareholder, and have no direct connection with Saitama Murata Manufacturing Co., Ltd.

Murata, TDK and Taiyo Yuden are the world's top three inductor manufacturers, with a combined market share of 40%. In recent years, these three Japanese inductor manufacturers have begun product and strategic transformation, aiming to provide high-end inductor products. China is the world's major inductor market. Against this background, China's local inductor manufacturers are in a position to give full play to the advantages of the industrial chain to gain a higher market share.

Taiwan-based manufacturer Yageo performed particularly well. Due to the large market demand, Yageo has continued to expand production in recent years, but there are still frequent reports that its products are in short supply and need to increase prices. Even in the case of sluggish demand at the beginning of this year, Yageo still has room to adjust prices.

There are also many manufacturers with outstanding performance in mainland China.

Shenzhen Sunlord Electronics Co., Ltd. was established in 2000 and is engaged in the development, manufacture and sales of chip electronic components. Sunlord's products focus on magnetic devices, microwave devices, sensitive devices, and are widely used in communications, consumer electronics, computers, automotive electronics, new energy, network equipment, industrial electronics and other fields. CICC pointed out that Sunlord Electronics is the leading manufacturer in the field of chip inductors in the mainland, and the company's 01005 miniaturized inductors have broken the monopoly of Murata.

Guangdong Fenghua High-Tech Co., Ltd.'s products include MLCC, chip resistors, chip inductors, ceramic filters and other passive components. It is one of the major MLCC manufacturers in China. In addition, Fenghua High-Tech's products also include electronic functional materials such as electronic pastes and ceramic powders. The gap between Fenghua High-Tech's MLCC products and those of Taiwanese manufacturers is relatively small, mainly in terms of production capacity.

Chaozhou Sanhuan (Group) Co., Ltd. is mainly engaged in the production of multilayer ceramic chip capacitors, metal glass packaging connection terminals, ceramic packaging bases for SMD, ceramic packaging bases for LED, aluminum nitride, alumina ceramic substrates, ceramic components for optical communications, ceramic substrates for resistors, fixed resistors, high-frequency wound chip inductor ceramic cores and substrates, fuel cell electrode sheets and other electronic components. It is an advanced technology ceramic industry base.

Fujian Torch Electronic Technology Co., Ltd. is a Chinese company that mainly specializes in the R&D, production, sales and technical support of ceramic capacitors. The company has accumulated more than 20 years of professional experience and possesses a number of core technologies with intellectual property rights. Its products are widely used in high-end fields such as aerospace, communications, electricity, and automobiles.

Shenzhen Maxjet Microelectronics Technology Co., Ltd. was established in 2001. Its main business is the research and development, production and sales of new chip passive electronic components and LCD display module devices such as chip power inductors, filters and chip LTCC RF components, and provides technical support services and overall component solutions to downstream customers.

The company's leading products are high-end passive electronic components, which are designed and manufactured with high precision. The products are widely used in communications, consumer electronics, military electronics, computers, Internet application products, LED lighting, automotive electronics, industrial equipment and other fields. The company's main customers are domestic first-class companies such as ZTE, Huawei, Lenovo, Xiaomi, AOC, TCL, Changhong, Coolpad, Meizu, and Konka.

The main business of Beijing Yuanliu Hongyuan Electronic Technology Co., Ltd. is the technical research and development, product production and sales of electronic components, mainly multi-layer ceramic capacitors (MLCC), including two categories: self-production business and agency business. The main products of the company's self-production business include chip multi-layer ceramic capacitors, leaded multi-layer ceramic capacitors, metal bracket multi-layer ceramic capacitors and DC filters.

Since its establishment in 2001, Shenzhen Yuyang Technology Development Co., Ltd. has been committed to the research and development, production and sales of electronic components. After nearly 20 years of development, Yuyang Technology has established a solid foundation in the independent research and development and large-scale production of MLCC. At present, Yuyang's micro and ultra-micro MLCC (01005, 0201, 0402 size) production accounts for more than 90%, the proportion of miniaturized products ranks first in the industry, and the total output of miniaturized products has also jumped into the top three in the world.

The products are widely used in mobile communication equipment, computers and peripheral products, built-in chips, network communication equipment, home appliances, security equipment, industrial control and automotive electronics, etc., and maintain close cooperation with many world-class companies, and have achieved comprehensive cooperation from 5G chips, terminals, base stations and cloud servers.

Zhuzhou Hongda Electronics Co., Ltd. mainly focuses on the research and development, production, sales and related services of military electronic components such as tantalum capacitors. The company's main products are tantalum capacitors, which can be divided into non-solid electrolyte tantalum capacitors, solid electrolyte tantalum capacitors and ceramic capacitors according to product technology types.