Nikkei BP Japan Technology Report / A1405-034-008 Japanese Automotive Component Manufacturers on Technology Development Strategy: New Partnerships to Surpass Old Limitations; Expanding into Electronics —Exclusive interview with top management at eight leading firms— Tatsuhiko Hayashi Nikkei Automotive Technology Abstract: The environment surrounding Japanese automotive component manufacturers is changing dramatically: the markets, the players, and the technologies are all evolving. Manufacturers face a range of challenges including getting into the high-growth BRIC markets, standing up to the European and American mega-suppliers, and answering surging demand for modularization, electrification, and electronics technology. This article probes the technology strategies of eight leading Japanese firms in the business through exclusive interviews with top management. © 2014 1 Nikkei BP Japan Technology Report / A1405-034-008 Part 1: Three Key Changes in the Business Environment Amid an environment that is changing rapidly, Japanese automotive component manufacturers are moving to counter intense competition and meet the challenges posed by emerging markets. Part 2: Development roadmaps for eight industry leaders DENSO Corporation “Offering products that are the first and the best of their kind in the world” Masahiko Miyaki, Executive Vice President Aisin Seiki Co., Ltd. “Proposing new systems and solutions” Shinzo Kobuki, Executive Vice President JTEKT Corporation “Integrating EPS into safety technology” Hiroyuki Miyazaki, Executive Director Calsonic Kansei Corporation “Growing into one of the top ten manufacturers in the world” Shigeo Shingyoji, Executive Vice President and Chief Technical Officer JATCO Ltd. “Pioneering the next generation of powertrains” Yo Usuba, Executive Vice President AISIN AW Co., Ltd. “Refining our automotive development capabilities” Kozo Yamaguchi, Executive Vice President Nidec Corporation “Nurturing automotive business revenues to 3 trillion yen” Shigenobu Nagamori, Chairman of the Board, President & CEO OMRON Automotive Electronics Co., Ltd. “The key to new business is offering added value” Manabu Sakai, Executive Officer Nikkei Automotive Technology published by Nikkei Business Publications (Nikkei BP) is Japan’s first comprehensive magazine that devotes editorial content not only to automotive technology updates but also to related engineering areas such as environmental protection, precision and appliances. Its target readers are engineers engaged in research, development and manufacturing of automobiles, automotive parts/materials and facilities. Key advertising clients include manufacturers of electronic and other automobile parts, makers of industrial precision robots for factory use, and developers of measuring components/software. “Nikkei BP Japan Technology Report” is a fee-based publication offering English-language translations of key technical articles selected from the full array of Japanese-language Nikkei BP publications. ( http://techon.nikkeibp.co.jp/english/ ) All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form without the written permission of the publisher. © 2014 2 Nikkei BP Japan Technology Report / A1405-034-008 Japanese Automotive Component Manufacturers on Technology Development Strategy: New Partnerships to Surpass Old Limitations; Expanding into Electronics Part 1: Three Key Changes in the Business Environment Abstract: Automobile sales volume will continue to grow, but the main battlefield will be the BRIC nations: Brazil, Russia, India, and China. Japanese component manufacturers face intense competition in those markets from European and American mega-suppliers. Technology, however, demands modularization, electrification, and advanced safety technology, and suppliers will have to combine competitive products with systems designed to integrate smoothly with peripheral components and systems. Major Japanese-capital component manufacturers and high-growth independent manufacturers alike will have to cope with the changing environment. This article probes their strategies. © 2014 3 Nikkei BP Japan Technology Report / A1405-034-008 Japanese automotive component manufacturers are at a crossroads, faced with changes in three significant aspects of the surrounding business environment: markets, competition, and technology. The market is changing due to shifts in production, rapid growth of BRIC nations (Brazil, Russia, India, and China), and relative stagnations in Japanese, European, and American markets. When Completely Built-up Units (CBU) were exported from Japan it made sense to boost domestic production capacity, but as manufacturing ramped up overseas and more firms established presences outside Japan, the production of automotive components in Japan began to fall, and inexpensive components began to flow into Japan from plants in other nations. The major battlefield will change from Japan, Europe, and the US to the BRICs. According to consulting firm Roland Berger Ltd. of Japan, sales of light vehicles (gross vehicle weight under 3.5 t) will reach 103 million units in 2019, with the BRICs accounting for 43% (Fig. 1). Sales in China alone with hit 30 million units, or 29% of the global total, with the total for Brazil, Russia, and India accounting for 14%. Sales in Japan and Korea will represent 6%, and the total for North America, Europe, Japan, and Korea combined will be 42%, or roughly equivalent to the total for the BRICs. Fig 1 Global light vehicle sales forecast Total unit sales in 2019 is expected to reach 103 million, of which 43% will be in BRICs nations. (Source: LMC Automotive, IHS Automotive, Roland Berger) © 2014 4 Nikkei BP Japan Technology Report / A1405-034-008 Not all vehicles will be manufactured locally, of course, but winning in the global market will demand supply capability in each region. New Players Growing Rapidly There are also changes in the line-up of companies in the automotive components market. One cause is stronger market presence by European and American mega-suppliers, who have lacked major development or production facilities in Japan in the past. In some cases they are the only suppliers of components that Japanese manufacturers do not offer at all, forcing automobile companies to buy from them or nowhere. And economies of scale promise excellent cost performance. In addition to existing component manufacturers, imports from low-cost countries are another threat. In Japan more and more Korean components are being adopted, and if Japan signs the Trans-Pacific Partnership (TPP) import duties will drop, leading to even more imported components. New players are also appearing in the rapidly expanding automotive electronic components market, through acquisitions and tie-ups. Continental AG of Germany, formerly a tire manufacturer but now growing rapidly as a full-spectrum component manufacturer, is one example, but similar trends are apparent in Japan as well. Motor manufacturer Nidec Corp. of Japan is aggressively acquiring firms in the automotive electronic components sector, and in March 2014 acquired Honda-brand manufacturer Honda Elesys Co., Ltd., which makes electronic control units (ECU) and sensors (Fig. 2). Once the acquisition is completed, the firm will become “an electrical component manufacturer like Bosch,” according to Nidec president Shigenobu Nagamori. The company is pursuing an aggressive growth strategy fueled by acquisitions and massive capital investment, and plans to boost automotive electronic component sales to 3 trillion yen by 2030. This target approaches the fiscal 2012 revenue of industry leader DENSO Corp. of Japan, 3.58 trillion yen. © 2014 5 Nikkei BP Japan Technology Report / A1405-034-008 Support for Modularization From the technical aspect, Completely Built-up Unit (CBU) manufacturers are moving en masse to modules. Volkswagen AG of Germany adopted the MQB (Modularen Querbaukasten in German, or modular transverse matrix) to slash development man-hours and component costs in decade-long terms, and is forging ahead in module adoption. Nissan Motor Corp. of Japan and Toyota Motor Corp. of Japan are promoting similar approaches, with Nissan already using the new Common Module Family (CMF) architecture in its new X-TRAIL model (Fig. 3). Fig. 2 Nidec acquisitions in automotive electronics Fig. 3 Honda’s new X-TRAIL model The first adoption of the CMF modular architecture. © 2014 6 Blanc page for sample Actual document contains p.7 to p.13. Nikkei BP Japan Technology Report / A1405-034-008 DENSO Corporation Spotlight on battery packs and advanced safety technology —DENSO seems be doing very well, with projected fiscal 2013 revenues of four trillion yen and net operating profit up 40%. Our business can be broadly divided into three major areas: powertrains, climate control, and information and safety. The rough revenue breakdown for fiscal 2012 was 35% for powertrains, 30% for climate control, and 16% for information and safety. We expect our net operating profit for this term to rise to just under 10%, thanks to yen appreciation and various organizational improvements we implemented after the subprime meltdown. —What are the main areas of interest for 2013? In powertrains, the switch to direct injection in gasoline engines is accelerating. New ignition systems have been commercialized that offer injection pressures of 20 MPa and smaller droplet size, along with higher voltages capable of assured ignition even with strong tumbling. Fourth-generation designs reaching common rail pressures of 250 MPa are now available for common rail systems in diesel engines, and already in commercial use by AB Volvo of Sweden and other firms. The new intelligent Accuracy Refinement Technology (i-ART) detects rail pressure change immediately after injection, adjusting fuel injection flow on a single-cycle basis. The © 2014 DENSO Corporation, Executive Vice President Masahiko Miyaki 14 Nikkei BP Japan Technology Report / A1405-034-008 function can constantly check for optimal injection. Research is under way now into using it in conjunction with a cylinder internal pressure sensor, and in the future it should be possible to optimize control for both injection and combustion. One recent success is the development of a start-stop mechanism under the company-wide “DENSO Project” program, or DP. We developed a tandem-solenoid starter motor that can instantaneously restart the motor even if the driver suddenly accelerates just before coming to a complete stop. The product is already being adopted in the industry. Our design for an air conditioner that can continue to emit cool air utilizing the evaporator heat storage system, even when the engine is stopped, it also being adopted in some start-stop vehicles. In the climate control area we have made air conditioning units smaller, lighter, and more fuel-efficient, while promoting standardization and increasing value-added content. Some examples are an air conditioner focuses on the driver’s seat, and module design processes optimized for different sizes. In safety technology, our infrared laser for low-speed automatic braking, which helps prevent accidental acceleration, has been adopted by Daihatsu Motor Co., Ltd. of Japan. It is mounted on about 80% of production vehicles now, contributing to improved driving safety. Corporate lifelines: development and quality assurance —What are the key issues for DENSO right now? The numbers for the fiscal year ended March 2013 show that R&D is quite high, at 9.4% of revenues. We also have a special group in charge of quality assurance, for example, and have positioned quality assurance as a top priority. That stance demands a certain level of fixed expense, but we can’t afford to cut it back. If we reduce spending on development and quality assurance, we’ll lose our rep for technology and quality. If we accept that as a given, two things become necessary. The first is to hold a very strong position in products, developing new products that are the first in the world, or the best. The second is to keep costs low by designing for manufacture. © 2014 15 Nikkei BP Japan Technology Report / A1405-034-008 The changing global situation is a major issue, too. It’s pretty clear that domestic vehicle sales are not going to grow much in the future, and we have to figure out a way to assure continued employment for our forty thousand employees in Japan. About half of the companies we deal with are automobile plants in Japan, shipping about half of their output overseas. Overall, about 75% of our components end up being used overseas. That calls for a serious look at how to split development and production activities between Japan and other nations. —How much does the Toyota Group account for? Sales to the Toyota Group accounted for 51.2% of total revenue in fiscal 2012, and Japanese manufacturers accounted for about two-thirds of revenue. If our powertrains are adopted by European manufacturers it will boost name recognition. In air conditioners, our products are already used in some models from German firms Bayerische Motoren Werke AG (BMW) and Daimler AG. Our common rail and ignition systems, however, haven’t had much success overseas yet. In Europe, collaborative projects between industry, academia, and government are usually tight, often drawing up standards. It is not easy for a Japanese firm to enter that community. We are hiring more PhDs in Europe and presenting papers at society meetings and symposiums in an effort to penetrate that network. SiC on track for volume production in 2015 —What are the newest themes for the DENSO Project? Five DENSO Projects are underway right now (Fig.). We launch two or three projects a year, mostly in the powertrain and information-safety fields, with two-year terms. In the powertrain field we started the dual-power supply system project in 2013, and the lithium battery pack project in 2014. The former development project is for a mild hybrid system using a 48-volt supply, with a belt-driven generator called an Integrated Starter Generator, or ISG. The latter project is concentrating on battery pack technology more than the actual cells. The goal is to © 2014 16 Nikkei BP Japan Technology Report / A1405-034-008 find a way to more efficiently utilize diverse cells, which should be useful in hybrid vehicle development. In information and safety we have three projects under way: the V2X project developing vehicle-vehicle and vehicle-roadway communications, launched in 2013, and the information security development project and the advanced safety vehicle system project, both started in 2014. The former covers technology designed to prevent people from hacking into vehicles, and the latter technology is designed to support automatic driving in the future. We envisage vehicles being primarily controlled by human drivers, with onboard systems providing assistance. —Any other activities you can discuss? Inverter power devices are currently made of silicon, but the use of silicon carbide (SiC), with its higher resistance to heat and current, will make it possible to shrink them to about 40% of their current size. We hope to work the bugs out of volume production in 2015. In safety, technologies are needed to judge if obstacles are human beings or animals, whether by radar, cameras, or whatever. We are pursuing this through collaborative research with ADASENS Automotive GmbH of Germany, which is a leader in image recognition. Fig. © 2014 DENSO Project roadmap 17 Blanc page for sample Actual document continues to p.44.