By Tim Kelly
TOKYO (Reuters) - As the breakneck growth in the global smartphone market eases, the mostly Japanese companies that make the robots that build the phones are looking to automakers to take up the slack.
Robotics remains a strength in a Japanese electronics industry that has been hammered by competition from rivals in South Korea and Taiwan. Panasonic Corp, Hitachi High-Technologies, Yamaha Motor Co, Fuji Machine Manufacturing and JUKI Corp together make eight of every 10 component mounting robots.
The quickest of these can mount more than two dozen parts a second, some thinner than a tenth of a millimeter. A line of 10 connected robots can put together 5,000 smartphones a day.
But, as smartphone sales growth slows, the chip mounters are feeling the squeeze.
Sales at Panasonic's chip mounter business - one of its non-core, but niche market leading divisions at the center of a revival plan - dropped by a tenth in the year to end-March. The business has around a 30 percent global market share.
Katsuhiko Omoto, who heads Panasonic's factory automation unit, sees little prospect for a rebound this year. "We don't really see big growth," he told Reuters at the firm's headquarters outside Tokyo. Around a third of the cabinet-sized machines made there end up in Chinese foundries cranking out Apple Inc iPhones and other mobile devices.
The global market for chip mounters is forecast to grow to $7 billion by 2015, according to industry researcher Technavio, from $4-$5 billion now.
Panasonic, which has bled red ink for years from its struggling television sales, announces its April-June quarterly results later on Wednesday. Operating profit is expected to increase nearly 30 percent to almost 50 billion yen ($510 million), according to StarMine's SmartEstimates, which uses top analysts' forecasts based on accuracy and timeliness.
Panasonic's component mounting robots business brings in around 1.4 percent of sales, but earns 6 percent of operating profit.
Smartphone sales are still growing, and market tracker IDC predicts annual shipments will top 1.5 billion by 2017, up from 917 million this year - but the blistering growth of the past five years is slowing.
IDC sees sales increasing by around 15 percent this year in mature markets such as the United States, down from 20.6 percent last year, and this will slow further to just 4.6 percent by 2017. In emerging markets - China accounts for around a third of global demand - growth will slow to 12 percent this year from more than 35 percent.
Omoto reckons Panasonic could boost its share of the chip mounting market by wooing the many smaller Chinese mobile phone makers that are gaining ground on Apple. The U.S. firm's Greater China sales slumped 43 percent in April-June from the previous quarter. Beyond that, Omoto, whose operating margins have slipped to 8 percent from 10 percent, is looking to reduce his smartphone related business to a quarter from 30 percent by selling more of his robots to the automaking industry.
Automatic parking, collision warning systems, cameras, and complex engine and suspension management computers add up to an under-the-hood boom in auto electronics. Drivers are also shifting to hybrids and electric cars, which tend to have more electronics than traditional gasoline models.
"The amount of electronics in a car is only going to increase," said Naoki Kobayashi, deputy chief engineer at Toyota Motor Corp's luxury Lexus brand, noting the recently launched IS model has one fifth more electronic control units than its predecessor.
Hitachi High Technologies, a majority-owned subsidiary of conglomerate Hitachi Ltd, is also eyeing opportunities among auto manufacturers and their supply chains.
"It looks as though the smartphone and tablet markets have peaked," said Masatoshi Kurosawa, a general manager at the Hitachi firm, adding he doesn't yet see any new consumer gadget to make up for the slowing smartphone momentum. His company and other chip mounters typically have around 10 months advance notice of new product launches when manufacturers begin shopping around for new production equipment.
MAKING THE SWITCH
Switching to supplying the autos industry requires chip mounters to focus less on speed and miniaturization and more on component traceability, said Hiroshi Nakamura, a managing officer at JUKI.
"For the past several years the market has focused on smartphones, and that has meant everyone focused on making fast machines," he said. "Automakers have stricter safety concerns which means they avoid cutting edge components."
In JUKI's showroom basement, Nakamura showed off one robot that snaps six photographs every time a component is mounted on a circuit board. That data is stored on a database allowing automakers to quickly trace any production faults.
Yamaha Motors, a long-time chip mounter supplier to the autos industry, has noted increased competition from rivals that have until now been more focused on smartphones. Its response has been to seek business at Chinese smartphone foundries which are buying fewer of Panasonic's high-speed mounters by offering to automate work, such as fitting connectors, that is still done by hand.
That kind of offer is going down well in Taiwan where annual wage increases of over 10 percent are pushing up labor costs.
"Wages in China, Thailand and Vietnam are rising and that's increasing the appeal of automation," said Hiroaki Fujita, who heads Yamaha Motor's Hamamatsu-based chip mounter business.
JUKI, which last month agreed to take over Sony Corp's chip mounter business, is also interested. "If it's faster than by hand then that's enough," said Nakamura.
(Additional reporting by Reiji Murai; Editing by Ian Geoghegan)