A key focus of U.S. President Donald Trump’s inaugural address in January was on bringing manufacturing back to the United States and restoring employment opportunities. A number of American companies, including Ford Motor, have canceled plans to build new plants in Mexico to shift investments back to their homeland. If this constituted the first wave, the second may be transferring production back from China to the U.S., and the third might be a similar changeover from Southeast Asia. These moves could deal a serious unexpected blow to Japanese manufacturers that have been building a tight production network in Asia as a key source of their global competitiveness.

It was against this background that Hon Hai Precision Industry Co. of Taiwan surprised the world by announcing last month that it would invest $7 billion in the U.S. On Jan. 22, its chairman, Terry Gou, revealed the first phase of the plan, construction of a new LCD panel plant that would be one of the largest of the latest generation of its kind.

That news caught the Japanese electronics industry off-guard. The world’s production of LCD panels has been concentrated in China, Japan, South Korea and Taiwan, but the supply capacity has already exceeded demand. The situation is about to be exacerbated further with a number of new large and state-of-the-art LCD panel plants being planned in China. Should the U.S. become a new supply source, there may develop not only a cutthroat competition among the manufacturers but also an industrial warfare between countries.

One problem is that large portions of materials and components essential for producing LCD panels are supplied by Japanese firms, including mother glass substrates, color filters, polarizers, LED light sources, semiconductors, condensers, power units, industrial gases and related equipment. A former engineer of Sharp Corp. says LCD panels cannot be mass-produced unless 50 to 80 suppliers are concentrated in an area within several hours of driving distance.

If Hon Hai is to proceed with making the LCD panels in the U.S. in compliance with Trump’s wishes, Japanese suppliers may have no choice but to invest in the U.S. without any assurances of success. For Hon Hai, on the other hand, losses that may result from manufacturing in the U.S. would not be devastating as long as it can be spared of border taxes that Trump threatened during last year’s campaign to charge on iPhones made in China — and thereby keeping intact its business with Apple Inc., which accounts for 70 percent of its profits. In such a scenario, the Japanese suppliers would have nothing to gain and Hon Hai nothing to lose.

Another case in point is Canon Inc., which manufactures laser printers, toner cartridges and other products in Dalian, China. Those products bear the logo of “HP” because they are exclusively for supply to HP Inc. on an OEM contract. Supply of printers to HP account for roughly 20 percent of the firm’s consolidated sales.

Should HP decide to shift printer production to the U.S. in response to a possible call from the U.S. president, Canon’s Dalian operations could come to an abrupt end. It would be suicidal for Canon to move its labor-intensive operation to the U.S., where the manpower cost is three to four times higher than in China. If, on the other hand, Canon switched production from Dalian to the U.S., that could anger the Chinese government, which had given the firm a favorable treatment for expanding its operations in China, possibly resulting in Canon being shut out of the Chinese market, a major source of consumption in photocopiers and single-lens reflex cameras. Such a scenario could put Canon in a catch-22 situation.

Meanwhile, six of Japan’s eight carmakers have established output operations in Thailand, the largest auto manufacturer within the Association of Southeast Asian Nations. Their combined production reached 2.46 million vehicles in 2012 and 2013, but dipped below 2 million in 2014 due to an economic slump following a military coup. The output in 2016 stood around 1.9 million. Faced with sluggish demand in neighboring ASEAN countries, some of the Japanese automakers are looking into the possibility of exporting their Thai-built models to the U.S., which they hope would create less political frictions than increasing shipments from Japan.

Then came Trump’s idea of imposing a 35 percent duty on car imports. Though the idea is believed to target imports from Mexico and Japan, the scheme contemplated by Japanese automakers in Thailand would come to naught if it were to be applied to all car imports. Other ASEAN countries like the Philippines and Indonesia are also trying to woo Toyota, Honda and other Japanese carmakers to invest there and help develop their automotive industries. But since those countries count on export as well as domestic demand, heavy U.S. duties on vehicle imports could dash their hopes as well as the strategy of the automakers to expand their Southeast Asian operations.

When Prime Minister Yasuhiro Nakasone and U.S. President Ronald Reagan agreed to beef up the bilateral security alliance in the late 1980s, trade frictions between the two countries were also at their peak. Japan came under pressure to open up the bids for government procurement and power industry works, and imported more U.S. goods, including Boeing Co. aircraft, which were introduced as the first government jet. A senior trading company executive says Trump may set his eyes on getting Japan to purchase more Boeing airliners, particularly as Europe’s Airbus is expanding its share in the Japanese market.

But more worrying for Japan’s manufacturing sector is the future of the Mitsubishi Regional Jet (MRJ), being developed by Mitsubishi Aircraft Corp. Despite the technical problems that have repeatedly delayed its planned delivery, large orders for the MRJ have been placed by American local airlines like the SkyWest Airlines and the Eastern Air Lines. But if the “Buy American” policy Trump emphasized in his inaugural address were to be extended to the airline industry, the future of MRJ sales in the U.S. market — on which relies the fate of the aviation industry that is emerging around Nagoya — may be in jeopardy. There may be demand that MRJs sold to U.S. airlines should be built in the U.S. That may serve a blow to the Japanese civil aircraft industry, which has been hoped to become a new engine of industrial growth.

While Trump’s foreign policy priorities may still not be clear, it seems clear that the president has his eyes set on realigning the global structure of manufacturing industries that have become heavily concentrated in Asia. And it will be Japan, whose companies have expanded their production networks more broadly across Asia than Chinese firms, that will bear the brunt of such an attempt.

This is an abridged translation of an article form the February issue of Sentaku, a monthly magazine covering political, social and economic scenes. English articles can be read at www.sentaku-en.com

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