Japan firms plan offshore move to diversify output

The threat of more quakes, power shortages and loss of clientele is forcing Japanese firms to shift more production, much of it offshore and with a new sense of urgency. Big manufacturers, hurting after the March 11 earthquake, tsunami and subsequent nuclear crisis wreaked havoc with the supply of parts, are demanding that suppliers diversify output facilities, especially those with key technologies. "If you are the only supplier for any particular good, we're going to ask you to have at least two production plants and not in the same area," Nissan Motor Chief Executive Carlos Ghosn said at the Reuters Rebuilding Japan Summit last week. "You don't want to be in a situation where you have one supplier in one plant producing everything you need," he said. "If there's one supplier, we need two plants. If not, we need two suppliers." This type of pressure may be the final straw for many who have until now stayed put, accepting Japan's high labour and electricity costs as a necessary price to pay for quality and intellectual property control. Some 70 per cent of domestic manufacturers expect at least one partner in their supply chains to speed up relocation efforts overseas, a trade ministry poll showed, accelerating a nearly two decade-long migration of Japanese manufacturing capability overseas. "Relocating is on the table for many executives. If a key supplier or partner moves, that could trigger a large exodus," said Shuzo Takada, director of the ministry's industrial revitalisation division. Several Japanese companies have already announced moves offshore as part of post-quake strategies to diversify output. Renesas Electronics decided to outsource more microcontroller production to Taiwan's TSMC and Globalfoundries in Singapore after the tsunami shut down a key semiconductor plant for nearly three months, while Fujitsu? plans to shift more chip output to a factory in China. Hoya is planning its first overseas plant in China while Mitsui Mining & Smelting, which supplies 90 per cent of the ultra-thin copper foil used in smartphones, is building a backup production line in Malaysia. From / Gulf News