In January, Matsushita Plasma Display Panel Co., owner of the Panasonic brand, announced a $2.3- billion investment in a fifth plant at its Amagasaki complex, after announcing its fourth plant – a $1.5- billion deal – in January 2006. Pictured is the third plant. Photo courtesy of Panasonic

I

t seems that the more living room space you conserve by switching to flat- panel televisions, the more living rooms need filling with them.
   How else to explain the massive corporate facility investments by such electronics giants as Sharp, Matsushita, Sony and others in South Korea and, increasingly, Japan?
   Two years ago, this publication reported a US$932- million investment by Sharp in an LCD panel and TV plant in Kameyama City. At the same time, Corning was pointing part of a $600- million investment in LCD glass production toward Japan. That was also the year that Matsushita Plasma Display Panel Co. (MPDP) – a joint venture between Matsushita Electric Industrial Co., Ltd. (and its Panasonic brand) and Toray Industries, Inc. – announced an $866- million plant in Amagasaki, located in the Hanshin industrial area near Osaka and Kobe that historically has been home to Japan's steel industry.
   Amagasaki is also home to the World Piggybank Museum. Judging from project investment amounts, a few banks have been broken open there over the past few years. In January, MPDP announced a $2.3- billion investment in a fifth plant in Amagasaki, after announcing its fourth plant – a $1.5- billion deal – in January 2006.
   The projects are part of a resurgent electronics sector that saw major 2006 investments, even as some, like Pioneer, scaled back plans in the same sector. Among the island nation's projects in 2005- 2006:
   • Toshiba and SanDisk's $5.2- billion investment in Iwate and $1.8- billion investment in Yokkaichi, in western Japan, both for chip production;
   • Toshiba's $1.7- billion investment in surface- conduction electron emitter display (SED) television production in Himeji;
   • Fujitsu's $1- billion semiconductor investment in Osaka;
   • A $1- billion investment by Shin- Etsu in Nagano, and a $950- million investment by Sumco in Saga, both in silicon wafer production; taking into account "all kinds of risks, including natural disasters such as earthquakes, damage caused by winds and floods and other such risks," Shin- Etsu is also expanding a plant in Shirakawa;
   • IPS Alpha's $577- million expansion in Mobara, Chiba prefecture, for LCD panel production;
   • Tokuyama Corp.'s $391- million investment in polycrystalline silicon for solar cells in Tokuyama;
   • Fujifilm's investments of $208 million and $205 million in LCD film production in Kanagawa and Ashigara, respectively, and Zeon Corp.'s $87- million investment in Himi for its own LCD optical films.
   • Canon's $179- million SED R&D investment in Hiratsuka

   But the string of plants from MPDP is without a doubt the humdinger. And that does not take into account Matsushita's tie- up with Toshiba on a separate $270- million, 368,000- sq.- ft. (34,187- sq.- m.) LCD display plant in Ishikawa.
   Construction on MPDP's latest plant in Amagasaki will begin in November 2007, with the first phase of production at the 3- million- sq.- ft. (284,000- sq.- m.) plant projected to occur in May 2009. The company says the plant will be able to produce 1 million 42- inch panels a month. That's twice the capacity of the complex's fourth plant, and more than five times greater than the capacity of its first. "With its overwhelming production capacity and cost competitiveness, Panasonic will lead the world market of large- screen flat- panel displays," said a company release.
   Helping reach that capacity peak will be new systems that enable the production of 10 42- inch panels or eight 50- inch panels from a single sheet of glass. Also helping will be a new production management scheme that MPDP is applying to all of its factories in order to realize "speedier and more flexible supply of the products." That supply will serve a worldwide demand for flat- panel TVs that Panasonic projects will reach 130 million by 2010, with plasma products comprising 23 percent of that total. /
   The process is nothing if not well planned: The announcement of MPDP's fifth plant occurred on exactly the same day (January 10) as the announcement of its fourth plant one year earlier. That plant will begin production in July 2007.

HIGH- TECH HOT SPOTS: The highlighted cities have seen substantial plant investments during 2005- 2006 in the semiconductor, electronics and related chemical sectors.

   The Japan External Trade Organization (JETRO) says the adoption of Japanese manufacturing techniques by emerging economies in the region, in combination with demographic trends and rising labor costs, has forced Japan to "make a concerted effort to maintain its competitive position by supporting innovation." The nation's high value- added industrial expansion is supported by its leading position in the ratio of R&D expense to GDP, hovering close to 3.5 percent as recently as 2004, nearly a full point ahead of Germany and the U.S. According to the country's Ministry of Economy, Trade and Industry (METI), research outlays in fiscal 2005 by companies, universities and government- backed research institutes hit an all- time high of $151.5 million, marking a sixth straight year of increase.
   Japan's trade surplus in November 2006 was 54.1 percent higher than it was in November 2005, led by the automobile, steel and electronics sectors. That same month, unemployment dipped to 4 percent, its lowest level in eight years. For the July- September 2006 quarter, corporate capital spending increased by 12 percent over the previous year's third quarter, the 14th straight quarterly increase.
   An April 2006 METI document outlined ways Japan is aiming to lessen its costs and its regulatory burden, while encouraging more assertive business attraction efforts at the national and regional levels. Even without those moves, however, the FDI trend is nearly as promising as the domestic- driven investment trend: METI was looking to attain $109 billion in FDI in 2006, double the total from 2001. The Abe administration aims to see FDI reach 5 percent of GDP by 2010, still well behind the ratio of other leading global economies.
   Another METI document released in August 2006 outlines the new Abe administration's key industrial and economic policy goals for fiscal year 2007. In addition to taking a leadership role in areas such as standardization, intellectual property protection and East Asian economic integration, the administration seeks to facilitate projects. Among the measures it intends to pursue, these stand out:
   • "Efforts will be made to foster the strategic areas identified in the New Industry Promotion Strategy, such as fuel cells, robots, and digital consumer electronics (the target is to develop the market size to approximately 300 trillion yen [US$2.4 trillion] by 2010).
   "Concurrently, the government will engage in various activities to generate initial demand, including regulatory reviews and R&D for the establishment of potential new industry groupings such as batteries for next- generation vehicles, state- of- the- art

Japan Ministry of Economy, Trade and Industry JETRO

medical machinery and drugs to overcome cancer, and next- generation aircraft, etc."
   • "From the standpoint of ensuring the international competitiveness of companies and maintaining consistency between Japan's system and international practices, a drastic review of the depreciation system shall be implemented in revising the tax system, and efforts will be advanced to this end." Among the goals of the review:
   "(1) Eliminate the 'upper limit of depreciation' and make the full amount depreciable. Also, review the figure for the years of depreciation to one that is not less than that of overseas countries.
   (2) Revise the system to one that companies will find easy to use.
   (3) Regarding local taxes, review the assessed value of fixed asset tax, etc. in accordance with the drastic review of the depreciation system."