According to a report published on October 16 by Nihon Keizai Shimbunsha, the Japanese government — due to its concerns about the impact of COVID-19 on the global industrial chain — is planning to provide an additional 86 billion Yen under the "Corporate Subsidy on Domestic Investment Promotion as a Countermeasure for the Supply Chain.” The policy should serve as a subsidy budget to assist companies that want to relocate their production to Japan.

 

Impact Analysis

 

To cope with the US-China disputes and post-epidemic changes on a global scale, at the beginning of the second quarter, the Japanese government has allocated about 220 billion Yen to assist companies that want to relocate their production from mainland China to Japan. A list of the first batch of 57 companies who are relocating to Japan (totaling 57.4 billion Yen) was disclosed on July 17. Though the total costs regarding these cases are still being processed, the aggregate should reach about 1.764 trillion Yen, which is ten times higher than the remaining budget of the 2020 fiscal year.

Looking at the bigger picture, even though China was previously ranked first among Japanese companies that preferred to establish their plants overseas, the proportion is still reckoned as the lowest (if correlated from the figures of the supply chain for Apple, the proportion of Japanese companies setting up factories in mainland China constitutes less than 30%) as compared to other primary competitors such as Taiwan and South Korea. However, it is believed that Japan will be the country with the highest degree of de-Sinicization in the post-epidemic era under public encouragement from the Japanese government and positive responses among manufacturers.

           From a value chain perspective, even if mainland China and South Korea challenged consumer products of terminal brands from Japan under its declining market share, the technical level of crucial upstream components and materials from Japan remains unshakable. The Ministry of Science, Technology, Information and Communication (MSIT) of South Korea has revealed that there are about ten categories of essential 5G components controlled by Japanese companies. Though Taiwan’s PCB industry's outlook is optimistic, the predicament of high-end materials being controlled mainly by Japanese companies remains a troublesome issue in the short term. Furthermore, even though the international co-opetition relationship seems to favor Taiwan’s industry, manufacturers must persistently pay attention to possible changes and respond carefully, given that Japanese companies' supply chain is highly inclined towards localization.