Business / Corporate

Japanese manufacturers brace for fallout — and losses — from U.S.-China trade war

JIJI

Japanese manufacturers are watching developments closely in the U.S.-China trade war, with the looming possibility of additional mutual import tariffs expected to further dampen their businesses.

The U.S. government has announced a list of some 3,800 items of Chinese products that would be slapped with a tariff increase, including products assembled in China with parts exported from Japan, such as smartphones.

At a news conference last Wednesday, Japan Display Inc. President Yoshiyuki Tsukizaki apologized for the company’s consolidated net loss of ¥109.4 billion for the business year to March of this year.

The sea of red ink reflected sluggish sales of iPhones of Apple Inc., a major customer of the small and midsize liquid crystal display panel maker under business rehabilitation, due to a slowdown in the Chinese economy.

The company saw changes in the market that “exceeded” its expectations, Tsukizaki said.

In the event of fresh U.S. punitive tariffs on imports from China, which include iPhones, JDI will likely suffer a major blow.

A China-Taiwan consortium has postponed its decision to invest up to ¥80 billion in JDI in order to re-examine the prospects for JDI’s business performance.

“There were no concerns over asset assessments so far, but changes occurred over our future operations,” JDI Chief Strategy Officer Takanobu Oshima said, admitting that the possible U.S. tariffs are having an impact on the negotiations for the capital injection.

Sharp Corp., which also supplies smartphone panels to Chinese companies, saw a downswing especially in its original design manufacturer, or ODM, operations, Sharp Executive Vice President Katsuaki Nomura said.

Sharp is also likely to take a big hit if the new punitive tariffs are implemented, analysts said.

“The tariffs could push down net profits at Japanese listed companies by a total of 2.3 percent in fiscal 2019 and 2020,” said Junichi Makino, chief economist at SMBC Nikko Securities Inc.

Another source of concern is a U.S. order that basically prohibits U.S. companies from trading with major Chinese telecommunications equipment maker Huawei Technologies Co.

“There are Japanese companies supplying parts to Huawei,” Finance Minister Taro Aso said, expressing concerns over a possible setback at Japanese manufacturers.