Development Bank of Japan
Research Report
No. 61

Forging New Corporate Alliances between the Auto
Industry and the Electronic Device and Component
Industry:
Opportunities and Challenges for the Electronic
Device and Component Industry in Automotive
Electronics

April 2008

Economic and Industrial Research Department
Development Bank of Japan

This report was originally published in Japanese as Chosa No. 95
in April 2008.

Contents
Summary ........................................................................................................................................

iii

Introduction ..........................................................................................................................................

1I

The Growing Importance of Car Electronics ............................................................................

3

II

Auto Electronics Market Where Competing Corporate Cultures Clash ................................
1. Allure of the Market’s Scale and Stable Growth..............................................................
2. Automotive Electronics Face More Rigorous Conditions Than Consumer Electronics ..
3. The Competitive/Collaborative Relations between Automakers andSemiconductor Producers in the ¥2 Trillion Automotive Semiconductor Market ...........

5
5
7

III Business-Relationship Transformations and Opportunities for the Electronic Device andComponent Industry Brought on by Car Electronics...............................................................
1. Replacement of Mechanical Systems with Electronic Controls ......................................
2. Move to Electric-Powered Cars: Batteries Are the Core of Electric Power Systems ......
3. Progression of Integrated LAN-Based Controls and Establishment of
Next-Generation Communication Standards....................................................................
4. Increasing Efficiency in Automotive Software Development: The “Tripolarization”
of Suppliers ......................................................................................................................
5. Advancement of Multimedia and Audio/Video Functions Centered on
In-Car Information Terminals ..........................................................................................

9

14
14
15

20
22
24

IV The Auto Sector and Emerging Distributed Business Models in the Electronic Device andComponent Industry ....................................................................................................................

26

V

Directions for Car Electronics in the Promising Low-Cost Auto Sector.................................

29

Conclusion.............................................................................................................................................

33

References .............................................................................................................................................

35

Development Bank of Japan Research Report/ No. 61iForging New Corporate Alliances between the Auto Industry and theElectronic Device and Component Industry:
Opportunities and Challenges for the Electronic Device and Component
Industry in Automotive Electronics
Summary
1. Auto electronics are making inroads in three
central areas: (1) control systems, such as power
train and steering systems and antilock braking
systems (ABS); (2) structural systems, such as
air-conditioning, gauges, and airbags; and (3)communication and entertainment systems,
which include car navigation units and in-car
local area networks (LAN). Electrical and electronic auto parts already account for a significant
share of all auto parts; in Japan, electronic-related parts are worth an estimated ¥6.7
trillion — approximately 35 percent of the valueof all shipped auto parts. Automobiles are expected to employ even more electronics in the
coming years as electronics technology plays acommanding role in addressing environmental
issues as well as public demand for greater
automotive safety and comfort. The growth of
auto electronics will also be driven by wide-scale
deployment of controls that integrate pre-crashsafety and intelligent transport systems (ITS).
2. The procurement base for electronic partsand materials has been broadening as electronics
continue to contribute more to a car’s value.
Collaborations with electronic device and component manufacturers are expected to increase
because of the rising number of technical problems that automakers cannot resolve on theirown, such as improving battery performance orefficiently developing embedded software. The
electronic device and component industry is
pouring an increasing amount of R&D resources
into the auto sector; the percentage of the industry’s total R&D spending devoted to the auto
sector jumped from 4.1 percent in 1999 to 7.3
percent in 2006. On the other hand, the electronic
device and component industry has found theauto sector a difficult one to crack. Automakers
place much more stringent requirements on their
suppliers — in terms of quality, reliability, andsupply responsibilities — than the consumer
electronics industry does. Nevertheless, the timeis probably ripe for the electronic device andcomponent industry to reconsider how it mightbring together knowledge, and build win-win
alliances, to overcome the divergent businesspractices resulting from the auto industry’s position as a bridge sector spanning several industries.
3. Semiconductors are the central component
in automotive electronic controls. Automotive
applications for semiconductors occupy a 7.1
percent share, worth 18.6 billion dollars in 2006,of the global semiconductor market. The automotive semiconductor market is projected to see
an average annual growth of 7.8 percent over the
five-year period between 2006 and 2011, which
will outstrip the average growth of the semiconductor market overall (an estimated 4.8 percent
per year over the same period). Some electrical/electronic architecture manufacturers produce
automotive semiconductors on their own, butthey appear to hope that semiconductor producers will tackle fields in which they are not involved or which are too complex for a single
company to develop. What electronic device andcomponent manufacturers need to do is to identify which areas the competitive products they
offer are best suited for — drive-train systems(such as batteries), comfort and safety systems(sensors, cameras, etc.), or information systems(car navigation units, ITS, etc.). Beyond this, if
electronic device and component makers canmove past just being supplementary part suppliers and combine cost competitiveness with newconcepts, they will likely be able to deepen theirrelationships as partners with automakers andelectrical/electronic architecture venders. Thisrequires firms to leverage their broad semiconductor and electronic component product lines
and put know-how and design assets accumulated from consumer electronics to good effect inDevelopment Bank of Japan Research Report/ No. 61

iiiautomotive applications.
4. The transformations brought on by advancesin electronics to the corporate alliances in theauto-parts industry can be considered from five
viewpoints: (1) the replacement of mechanicalsystems with electronic controls, (2) the move toelectric-powered cars, (3) the progression of integrated LAN-based controls and establishmentof next-generation communication standards, (4)the increasing efficiency of automotive softwaredevelopment, and (5) the advancement of multimedia and audio/video functions centered on
in-car information terminals. Of the various corporate alliances, most automaker and electronicparts supplier tie-ups involving lithium-ion batteries — the heart of electric-powered vehicles— comprise joint development and, in somecases, even include capital investments. From theperspective of the electronic device and component industry, securing stable buyers is essential
in mitigating the risks associated with the priorinvestment needed to develop next-generation
vehicles. The ideal situation for these firms is todevelop products in cooperation with a specificautomaker, then to expand business horizontallyto other clients. Complicating this ideal, however,is the fact that joint-venture contracts are likely
to contain clauses restricting horizontal expansion. And partners, having developed products
intended to differentiate their brand in the marketplace, have little desire for those products tobe sold early on to other companies. How firms
weigh the pros and cons of building partnerships,
based on forecasts of shipment volumes andtechnical synergies, is thought to contribute to
the differences found in corporate alliances in thelithium-ion battery business.
5. The move to increasingly integrate and coordinate electronic controls in cars is causing theburden of developing software embedded inelectronic control units (ECU) to soar. The quality of in-car software has a profound impact ontechnologies that aim to add more value toautomobiles, namely through better fuel economy performance and safety. Consequently, newcorporate alliances are being sought that canerect frameworks permitting efficient softwaredevelopment. The auto industry is considering aniv

Development Bank of Japan Research Report/ No. 61

approach whereby it would standardize softwarein the platform field and leave the application
field to individual firms, which would try to differentiate their products’ functions. The movement to standardize ECUs, which previously
were developed individually for each application,and integrate key ECUs can be regarded as a newoffshoot of the modularization trend. In the near
future, auto-parts makers may well be “tripolarized” into three separate camps: (1) those withthe development capacity to integrate entire systems, including platforms, (2) those that develop
applications and mechanical subassemblies basedon established platforms and specifications, and(3) those that specialize in mechanical development and do not get directly involved with ECU
development. The mechanical specialists in thisthird group face the greatest threat from deteriorating business conditions. They must leverage
their mechanical control expertise, proactively
build their own partnerships with electronic
component and device makers, and regain theinitiative in system integration and cost controls.
6. It is becoming increasingly common forcompanies in the electronic component and device industry to sell their device-control expertiseto other firms; soon, firms will probably be able
to create at least commodity-level products simply by assembling inexpensive parts procured
from sources around the world. The distributed
business model is becoming more persuasive, notonly at the end-product level but also at the levelof semiconductors, where control expertise isembedded. Circumstances in the auto industry,
however, are different. The functions of cars are
realized through the integration of tens of thousands of parts, which requires the special expertise of the automaker. Thus, automakers are expected to remain the central players in upstream
areas, such as overall system design based on
automotive-control know-how. Full adoption offabless-foundry models is seen to be difficult, atbest, in semiconductors as well, since the required quality and reliability levels are far higher
than those for consumer electronics. What is
considered more likely are takeovers by electronic device and component makers of Tier 1
auto-parts producers. Corporate alliances could
also be altered by advances in digital controls,brought about by technical innovation in automobiles and fundamentally different from theknowledge capital automakers possess. Electriccars, heralded as the future incarnation of thepassenger vehicle, may have the potential torevolutionize automotive systems.
7. Other than in China, future auto-sales
showdowns are expected to take place in India,
the Middle East, Africa, and other developing
regions. Competition between global automakers
over the development of low-cost cars is intensifying. Yet it is no easy matter to develop cars inthe ¥300,000 to ¥500,000 range and maintainquality and a brand image; even the lowest
priced cars must perform well enough to meetenvironmental and safety standards. To produce
cars this cheaply priced, makers are thought tokeep tight control over costs apportioned to partsand materials; this means that electrical components, which have to satisfy legal requirements,
are kept to a bare minimum. Thus, in an envi-

ronment of razor-thin profit margins, it is important that makers of electrical/electronic architecture earn by selling in volume. They must expand sales by diversifying their customer baseand work to slash costs by changing materials,
reducing the amounts of materials used, and improving production processes. High prices
greatly reduce the percentage of cars in developing countries that are equipped with safety accessories such as ABS or airbags, or options suchas air conditioners, music systems, or car navigation units. Yet there are definite latent needs forincreased safety and comfort. The first electrical/electronic architecture manufacturers that candrastically cut their production costs from today’s levels will have an enormous market waiting for them. Japanese makers are expected totackle this challenge head on.

[M. Shimizu (E-mail: report@dbj.go.jp)]

Development Bank of Japan Research Report/ No. 61vIntroduction
The procurement base for electronic parts andmaterials is broadening as automobiles rely increasingly on electronics. Greater collaboration
with electronic device and component manufacturers is expected because of the rising numberof technical issues that automakers cannot resolve on their own, such as improving battery
performance or efficiently developing embedded
software. Statistics show that the electronic device and component industry is pouring an increasing amount of R&D resources into the auto
sector; the percentage of the industry’s total
R&D spending devoted to the auto sector jumped
from 4.1 percent in 1999 to 7.3 percent in 2006.
Total R&D spending rose by an average of 1.9
percent per annum over this same period, but
auto-sector spending was much faster at 10.5
percent (Figure 1).

On the other hand, the existence of numerous entry barriers has made the auto sector a difficult one for the electronic device and component industry to crack. Nevertheless, the time isprobably ripe for the electronic device and component industry to reconsider how it might bring
together knowledge, and build win-win alliances,to overcome divergent commercial practices resulting from the auto sector’s position as a bridge
sector spanning several industries.
In this paper, after analyzing how the growing use of auto electronics is changing conventional corporate alliances and business environments in the auto-parts industry and considering
new opportunities and challenges for the electronic device and component industry, we propose a number of policies by which these industries can build deeper cross-industry partnerships.1

Figure 1. Transitions in Auto-Sector R&D Spending by the Electronic Device andComponent Industry(in billions of yen)
3,500
350

(%)

3,000
300
2,500
250
2,000
200
1,500
150
1,000
100
500
50

12.0

294.3
235.2

146.0

160.7

4.7

10.0

231.7

8.0

194.7
6.7

4.3

4.1

175.9

261.5

6.3

6.6

7.3

6.0

5.2

4.0
2.0

00

0.0
1999

2000

2001

2002

2003

2004

2005

2006

(FY)

R&D spending in the auto sector by the electronic device and component
industry
Percentage of total R&D spending devoted to the auto sector (right axis)

Source:“Reports on the Survey of Research and Development,” Ministryof Internal Affairs and Communications.

1

This paper revises and expands upon Chapter 2 of “Current Conditions and Future Directions of Electronics in the
Automotive Industry” (a 2006 subsidized research and study
project) and Chapter 3 of “Study on Changes to the Business Environment and Corporate Alliances in Auto Parts
and Related Issues” (a 2007 subsidized research and study
project). Both are published by the Economic ResearchInstitute of the Japan Society for the Promotion of Machine
Industry.

Development Bank of Japan Research Report/ No. 61

1I The Growing Importance of Car
Electronics
The City of London announced in February 2008
that it would be introducing a series of graduatedcharges of up to 25 pounds a day (approximately¥5,100) on high CO2 emitting vehicles entering
the city limits. The maximum levy will apply to
the Range Rover and other four-wheel-drive vehicles and sports cars such as the Porsche 911.
Commuting to the city in one of these vehicles
20 days a month, for example, would cost upward of ¥100,000. On the other hand, vehicles
with low CO2 emissions will be exempt from thecharges; thus, drivers of the Toyota Prius, theHonda Civic Hybrid, and other similar cars will
not be affected by the new charges.2 The City of
London has set a target of reducing greenhousegas emissions by 60 percent from 1990 levels by
the year 2025. This scheme will both reduce carcongestion in the city and encourage the use of
low CO2 emitting vehicles.

The transport sector continues to emit into
the atmosphere an increasing amount of greenhouse gases, which are one cause of global
warming; more vehicles are on the road andthese vehicles are traveling longer distances. In
OECD countries, the transport sector’s contribution to total emissions of greenhouse gases ispredicted to rise from about 20 percent in 1995
to 30 percent in 2020 (Figure 2).3 At the sametime, automotive growth is expected to mushroom in non-OECD countries, such as China,
India, and Latin American countries. All thisadds up to a sobering sense that the automotive
industry cannot survive if ways to cope with
global warming are not found. Automakers are,consequently, prioritizing the development ofpractical technologies to curb CO2 emissions.
One initiative is Nissan Motor’s “Nissan Green
Program 2010,” released in 2006. This programemphasizes the manufacturer’s commitment todeveloping eco-friendly technology that willslice its vehicles’ CO2 emissions by 40 percent in
the next ten years.4

Figure 2. Greenhouse Gas Emissions by Sector in OECD Countries (1998)
3%

3%

5%
Fuel combustion at fixed emissions
sources
T ransport

9%

Agriculture

21%

Industrial processes

59%

Waste material
Fuel production

Source: Taken from OECD Environmental Outlook to 2020, Environment Directorate, OECD
[original source: United Nations Framework Convention on Climate Change].

2

Examples of cars that will be liable to the higher charge
are the Porsche 911, most BMW 7 series, Range Rover,Land Rover Discovery, Toyota Land Cruiser, Volkswagen
Touareg, and the Mercedes M Class. Examples of cars
which will be eligible for the 100% discount are the Seat
Ibiza Ecomotion, Volkswagen Polo BlueMotion, Toyota
Prius, Toyota Aygo, Peugeot 107, Citroen C1, and the
Honda Civic Hybrid. See the following Web address formore details:
http://www.london.gov.uk/mayor/congest/docs/decision-statement02-2008.pdf.

3

See OECD Environmental Outlook to 2020, Environment
Directorate, OECD.
4See
http://www.nissan-global.com/JP/NEWS/2006/_STORY/06
1211-01-j.html.
Development Bank of Japan Research Report/ No. 61

3The well-to-wheel energy efficiency ofgasoline-engine vehicles is 14 percent; thismeans only about one-seventh of the potential
energy in crude oil taken from the ground is actually used (Figure 3). This poor efficiency stems
from the large amounts of energy lost as heat
during combustion and lost through cooling at
the radiator. Since the internal-combustion engine is very likely to remain the automotive
power plant of choice for the foreseeable future,
there is a pressing need to develop technologies
that make engines more fuel efficient.
One alternative to this scenario is the hybrid
electric vehicle (HEV), which combines a gasoline engine and electric motors to reduce its impact on the environment. Interest is growing in
HEVs because of their dramatically higher energy efficiencies, which result from energy regeneration during deceleration and from ahigh-efficiency primary engine. Practical“plug-in” hybrids, which can be charged from ahousehold power socket, are also on the horizon.

And in the mid-to-long term, attention is focusing on fuel-cell cars and electric cars, which run
solely on electric motors, as the next vanguard ofenvironmentally friendly vehicles. Fuel-cell cars
are particularly attractive because they generate
no CO2 — only water vapor. Electricity generated through a chemical reaction in the fuel cells
between hydrogen and oxygen powers the electric motors that propel the car.
Electronics technology has a huge role toplay not only in combating environmental issues
but also in addressing demands for greater automotive safety and richer entertainment systems
that provide more traveling comfort and pleasure.
The use of electronics in cars will surely takeanother large step forward as pre-crash safety
devices, which prevent or avoid automobile accidents, are installed on a wider range of cars andas intelligent transport systems (ITS) arrive thatenable interactive control between roadway infrastructures and the vehicles they carry.

Figure 3. Automotive Energy Efficiencies
Tank to Wheel [%]Well to Wheel [%]Gasoline cars

Well to Tank [%]
88

16

14

Gasoline hybrid cars (Prius)

88

37

32

Fuel efficiency (well to tank) (%) × vehicle efficiency (tank to wheel) (%) = total efficiency (well to wheel) (%)

Notes:

Well to tank: Efficiency from extracting and producing the fuel to fueling the vehicle.
Tank to wheel: Efficiency of consuming the fuel in the tank and powering the car’s wheels.
Source: Prepared from Toyota Motor materials.

4

Development Bank of Japan Research Report/ No. 61

II Auto Electronics Market Where
Competing Corporate Cultures
Clash
1.

Allure of the Market’s Scale andStable GrowthAuto electronics are making inroads in three
central areas: (1) control systems, such as power
train and steering systems as well as antilock
braking systems (ABS); (2) structural systems,
such as air-conditioning, gauges, and airbags;and (3) communication and entertainment systems, which include car navigation units andin-car local area networks (LAN) (Figure 4). In
the first area, development of electronics for engine regulation and the power train must keep
pace with regulations that set mileage and gas
emission targets. New electronics technology
used in structural systems, such as braking,steering, and suspension, is obliged to undergo
rigorous testing and verification since they govern the car’s basic propulsion, stopping, andturning operations. Finally, electronics for thethird area — car navigation units, audio systems,
and the like — essentially involves the conversion of established consumer technology toautomotive applications.
As Figure 5 indicates, the value of shipped
automotive components in FY 2006 grew by 8.4
percent over the previous year to ¥19 trillion.
Two of the fastest growing segments over thistime were the electrical devices and electronicparts segment (engine control units, alternators,
sensors, etc.), which grew by 20.6 percent, andthe electrical and electronic parts for lighting andinstruments segment (headlights, switches, wire
harnesses, electric motors, etc.), up by 14.1 percent. 5 The total value of electronic parts —when car stereos, heating and cooling equipment,
and IT-related devices (such as car navigation
units and ETC units) are counted — is estimatedat about ¥6.7 trillion, which accounts for roughly
35 percent of the value of all shipped auto parts.
The value of global shipments by Japanese electronic parts manufacturers — ¥4.7 trillion in FY
5
See the Survey of 391 Member Firms section in Trend
Survey of Shipped Automotive Components, Japan Auto
Parts Industries Association.

20066 — also signals that, for the electronic device and component industry, there are few if
any markets this size or with this expected stablelong-term growth. This certainly explains themarket’s attractiveness to so many.
Automotive control units consist of sensors,which gather information about the driving environment or the engine status, an electronic
control unit (ECU), which processes signals fromthe sensors, and actuators, which apply the actual
controls (Figure 6).
An ECU incorporated in the engine, forexample, is designed to optimize the fuel-air
mixture and control the timing of ignition andcombustion for the highest efficiency. Inside theunit, analog signals from the sensors are converted to digital signals and input to the microprocessor. The microprocessor makes decisions
or calculations according to this information andoutputs instructions to power semiconductors toadjust the conditions to achieve optimal combustion. The power semiconductors drive the actuators. Recent high-end cars have as many as 70
microprocessors and close to 100 sensors; electronics and related components make up between
20 and 30 percent of the cost per vehicle. There
has been a huge jump in the number of motors
used on the actuator side as well.
Power steering units are transitioning toelectric systems from the conventional hydraulic-assist systems that run off the engine. Electric
power steering gives better fuel mileage because
it eliminates the energy wasted by constantly
running a hydraulic pump.
Similarly, some luxury cars now featureelectronic parking brakes that operate via aswitch rather than the conventional foot-operated
parking brake that locks the rear wheels with cable tension. Electronic parking brakes can be designed to engage automatically whenever thetransmission is put in park, thereby adding to thevehicle’s safety.
This increasing use of electronics and electric power in cars is not only essential to passenvironmental and safety regulations but also an
important value adder to cars.

6

See the Survey of 100 Firms section in Statistics on
Global Shipments of Electronic Parts, Japan Electronics andInformation Technology Industries Association.

Development Bank of Japan Research Report/ No. 61

5Figure 4. Progress of Auto Electronics
Structural Systems

Communication andEntertainment Systems

Control Systems▼Automatic air-conditioning▼Electronically controlled gauges▼Air bags▼Keyless entry▼Power windows▼Engine controls▼Electric power steering▼ABS (Anti-lock Brake System)▼Electrically controlled suspension▼Cruise control▼Navigation units▼Car audio▼In-car LAN

Source: Prepared by the Development Bank of Japan.

Figure 5. Shipped Value of Auto Parts by Category
Navigation systems
ETC units
Telematics

IT-related parts 3.5%
Heating/cooling devices 4.8%

Headlights
Speedometer and other
instruments
Wiper motors
Switches
Relays and solenoids
Immobilizers
Wire harnesses

Starter motors
Alternators
Ignition coils
Engine control units (ignition systems,
fuel control systems, etc.)
Braking-related electronic units (antiskid
controls, etc.)
Electronic components and sensors

Car radios/stereos 2.6%

Engine components 15.8%

Electrical and electronicparts for lighting andinstruments 14.8%
Drive train and steering
components 18.9%
Electrical devices andelectronic parts 9.0%
Parts for otherapplications 0.6%

Suspension and braking
components 5.8%

Chassis parts 24.2%

Total ¥19 trillion

Source: Trend Survey of Shipped Automotive Components 2006, Japan Auto Parts Industries Association.

6

Development Bank of Japan Research Report/ No. 61

Memory
I/O ports

TimersActuators

CPO

Power semiconductors

Microprocessorers

Output processing circuitry

A/D conversion circuitry

Wheel-speed sensors
Air-flow sensors
Water-temperature
sensors
Oxygen sensors
Throttle sensors
etc.

ECU
(Electronic Control Unit)
Input processing circuitry

Sensors

Figure 6. Structure of Automotive Control Units

Ignition
Injectors
Idling controls
Electric motors
Piezo elements
etc.

Source: Prepared based on “The Illustrated Guide to Semiconductors,” Toshiba.

2. Automotive Electronics Face More
Rigorous Conditions Than Consumer
Electronics
Electronic components for the auto industry are
required to meet much higher reliability standards than those for consumer-use electronics(Figure 7). The severe temperature changes
automobiles undergo are one reason for thestringent conditions: while engine compartments
reach temperatures in excess of 100ºC, cars mustalso perform in frigid regions where temperatures drop tens of degrees below freezing. One of
the effects of this extreme temperature range isthe sulfidizing gas that greased areas on andaround the engine give off at high temperatures.
Because this gas can disrupt electrical circuitry,electronic components are being developed usingmaterials that are highly resilient to sulfidization.
Auto electronic parts must operate reliably
for many years in demanding conditions that,aside from temperatures, include high humidity,
corrosion, shocks and vibrations, and voltage
fluctuations; this is why automotive electronics
often have different specifications than those for
consumer-use applications.
Electronic components in cars also face theproblem of noise generated by the engine andelectric motors as well as external noise — elec-

tromagnetic fields and radio waves. ECUs andin-car LANs are required to have fail-safe
mechanisms to prevent noise from causing themto malfunction. At the same time, the increasing
deployment of electrical and electronic devices
prompts more pressing demands for low-power
consumption, to limit battery loads, and forlighter, more compact form factors, to improvefuel economy and save space. And added to allthese requirements are pressures to drive down
prices to commodity levels.
On the other hand, auto parts do have theadvantage of long production runs once theyclear these rigorous quality standards. The product lives of parts for consumer products likeflat-screen TVs or mobile phones are very short,around a year or so. Auto parts, however, generally take two to three years to develop and are
produced in volume for five to six years. Even
after volume production ends, manufacturers
must continue to supply the parts for a further ten
to 15 years for servicing and repairs. Consequently, one of the most important prerequisites
when sourcing auto parts is the ability of the
supplier to guarantee stable supplies over many
years.
Automakers often bring in suppliers to develop particularly critical parts right from theinitial concept stage of a model, a practiceDevelopment Bank of Japan Research Report/ No. 61

7known as concept integration. Many electronic
device and component manufacturers end up
spending several years developing a product together with an automaker or electrical/electronicarchitecture manufacturer. Component manufacturers must produce parts, even microprocessors,consistent with the client’s specifications, which
is a major departure from commodity components made for household electronic devices.
This leads to business models that are substantially different from consumer-application businesses.
Still, even in the same car electronics world,a variety of business relationships are found depending on the type of part. Automakers are said
to have a strong tendency to choose suppliers
they know well for components, such as engine
ECUs, related to the key propulsion, stopping,
and turning operations. For these components,
automakers strategically select quality and reliability over the lowest price. Electronic device
makers involved in the auto business say theymust continuously vary their tactics according to
the client and the product since procurement
strategies and selection criteria for multiple-sourced, price-sensitive components are dif-ferent from those for quality/reliability-sensitive
components and since each automaker has its
own unique procurement stance.
In the auto world, automakers prize trackrecords when selecting suppliers and they question suppliers very thoroughly about their quality
assurance systems, naturally enough. Automakers also scrutinize potential suppliers overthe stability of their supply system and their capacity to deal with cost reductions. Consequently,
electronic device and component makers must
maintain a higher level of awareness of the end
application in their design, development, andproduction controls for auto electronics than for
consumer-use electronics. This is one of the reasons new entrants find it difficult to be accepted
into the auto market.
But from the standpoint of suppliers with asolid track record in the industry, long-term relationships built with automakers become a hugeplus because other manufacturers cannot easily
enter the market. The initial hurdles are large;
however, once chosen, suppliers can expect thebusiness relationship to last many years. This too
is a significant difference from the consumer-electronics market.

Figure 7. Stringent Conditions on Automotive Electric Control Systems
Extremely reliable: must withstand harsh operating conditions for many years (–40ºC to +120ºC, high humidity,
corrosion, vibrations and shocks, voltage fluctuations, etc.)
Low noise (safety)
 Low power (limited battery capacities)
 Compact and lightweight Stable, long-term supply system (development: three years, volume production: five to six years, supply as spare parts:
ten to 15 years)
 Inexpensive
 Control multiple tasks simultaneously (real-time controls, network controls) Cope with increasingly tough legal requirements●Parts related to the key
propulsion, stopping, and turning
operations (such as engine ECUs)↓
Automakers have a strong tendency
to trust suppliers they know wellfor these parts since quality andreliability are more important toprocurement strategies thanbargain-basement prices.

A variety of business relationships exist,
depending on the part, even within thesame car electronics field.

■ Electronic device makers involved in the auto
business
Continuously vary their tactics according to the client
and the product since procurement strategies andselection criteria for multiple-sourced, price-sensitive
components are different from those for
quality/reliability-sensitive components and since eachautomaker has its own unique procurement stanceSource: Prepared by the Development Bank of Japan.

8

Development Bank of Japan Research Report/ No. 61

Auto electronics demand a much higher level ofawareness of the end application in design,development, and production controls than do
consumer-use electronics.

• Difficult for other companies to be accepted by the market• Prior long-term relationships with automakers are
extremely advantageous• The initial hurdles are large, but business relationships
tend to last many years once accepted as a supplier

3.

The Competitive/Collaborative Relations
between Automakers and Semiconductor
Producers in the ¥2 Trillion Automotive
Semiconductor Market

Semiconductors are the central component inautomotive electronic controls. The auto industry
is expected to become the next big demand
driver for semiconductor applications, whichhave been largely oriented toward the computer
market although they are now diversifying into
communications and digital home appliances.
Automotive applications for semiconductors
occupy a 7.1 percent share, worth 18.6 billion
dollars in 2006, of the global semiconductor
market. In the same year, 69.21 million
four-wheel vehicles were produced; thus, theaverage worth of semiconductors per vehicle,
estimated by simple division, is 269 dollars. The
automotive semiconductor market is projected tosee average annual growth of 7.8 percent between 2006 and 2011, which will outstrip the

average growth of the overall semiconductor
market (an estimated 4.8 percent per year overthe same period) by a significant margin (Figure8).
One cited factor driving expansion in theautomotive semiconductor market is, in addition
to the natural growth in the numbers of cars produced, the trend to use more semiconductors ineach vehicle. The value of per-vehicle semiconductors for gasoline (midsize) cars is anticipatedto climb from about 250 dollars in 2004 to morethan 350 dollars in 2006 and total just under 450
dollars in 2010. It is worth mentioning thathigh-end hybrid cars — in which power supply
controls are a chief component — are loadedwith more than 1,400 dollars of semiconductors
per vehicle (2005). 7 Semiconductors are used
extensively in engine control units, airbags, carnavigation units, and ABS, and they make up asignificant portion of the total cost of these devices.

Figure 8. Global Automotive Semiconductor Market Set to Top ¥2 Trillion(in billions of dollars)
30
300
30
7.8% growth from2006 to 2011

Forecast:
25
250
25

200
20

150
15

100
10

505

0
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 (Year)

Source: Gartner “Dataquest Alert: Semiconductor Market Forecast (4Q07 Update)”;Richard Gordon, 7 December, GJ08018.

7

Figures supplied by Akira Minamikawa (iSuppli Corporation Japan).

Development Bank of Japan Research Report/ No. 61

9Figure 9 shows that Western semiconductor
manufacturers rank at the top alongside Japanesefirms in the global automotive semiconductor
market by production value. Infineon Technologies, STMicroelectronics, and European manufacturers appear to have far-reaching business ties
in the European auto industry, as do Freescale
Semiconductor and other U.S. producers in the
U.S. auto industry. Japanese producers have ensured themselves a solid market share by concentrating on the Japanese auto world. But in order tofurther expand their businesses, they face thechallenge of beefing up their global expansion
efforts; deepening their sales channels in theWestern auto industry is an especially important
issue.
The general approach in the auto sector isfor semiconductor firms to sell discrete power
semiconductors and sensors to electrical/electronic architecture makers, who incorporate them in engine controllers and other systems,
which are then delivered to automakers. There
are some Tier 1 suppliers, however, such as Toyota Motor, Denso, and Bosch, involved in developing and producing semiconductors on theirown.8 The overwhelming strength of these electrical/electronic architecture producers is believed to stem from their integrated semiconductor-to-system development, which allows them toquickly ascertain needs and offer systematic
proposals through constant dialog between car
design divisions and semiconductor development
divisions.
Having said this, both Bosch and Denso,
which produce their own semiconductors, consume more than they produce, as the comparison
between production and consumption shares in
the automotive semiconductor market in Figure 9
indicates. What this suggests is neither company
produces all its semiconductors in house; in fact
they procure quite a large percentage of thesemiconductors they use from external venders.
8

Bosch announced in June 2006 it was investing about 550
million euros to expand its Stuttgart semiconductor plant,
which uses eight-inch-wafer technology. Denso announcedin April 2007 it would be investing a total of about ¥24.0
billion by FY 2015 to establish a new company to produce
automotive semiconductor products in Chitose, Hokkaido,
Denso’s third base after the Kota and Takatana plants in
Aichi.

10

Development Bank of Japan Research Report/ No. 61

Although philosophies on in-house production
versus external procurement vary from company
to company, we can guess at the strategy mostfirms employ — attempt to secure a competitive
advantage with development capabilities in all
ECUs by developing and producing key semiconductor devices in house and using semiconductor manufacturers for mass produced or readily available semiconductors. From the standpoint of the electronic device and component
industry, these sorts of electrical/electronic architecture producers may become both customers
and competitors. An important issue for electronic device and component makers then is how
to build win-win relationships with these firms
while maintaining an acceptable balance ofcompetition and collaboration (Figure 10).
Electrical/electronic architecture makers, fortheir part, are not comprehensive semiconductor
producers. They are believed to want to bring insemiconductor partners to handle areas they lackcompetence in or development projects too complex for a single company. In view of the circumstances of both sides, complementary roles
may well form in which semiconductor manufacturers will avoid areas where electrical/electronic architecture makers have strong
competencies but will supply products in areas
electrical/electronic architecture makers cannot
cover on their own.
Automotive semiconductors themselvesspan a wide gamut — from microprocessors
embedded in ECUs to power semiconductors,
analog semiconductors, charge-coupled device/complementary metal-oxide-semiconductor(CCD/CMOS) sensors, and light-emitting diodes(LED), among others.
Power semiconductors are used for AC–DC
conversions and for modulating voltages. Large
numbers of insulated gate bipolar transistors(IGBT), diodes, and other power semiconductors
are used in inverter modules that control HEV
motors. An indispensable part of rolling out
HEVs en masse then is improving the performance and the price points of power semiconductors. Hurdles to the commercialization of inexpensive, compact, high-performance invertersand DC–DC converters 9 include the development of new materials — such as replacing silicon with silicon carbide (SiC) — and competencies in bringing together cooling technologies
and substrate-mounting technologies. Electronic
device and component makers who have thisspecialized knowledge can expect opportunities
for collaborations with auto-parts venders. Similarly, cars are expected to carry increasing numbers of sensors, as sensors play a significant rolein improving environmental and safety performance. Naturally buyers are pressing for performance improvements and lower prices from sensors as well.
It is vital that electronic device and component makers thoroughly investigate which areas
the competitive products they offer are best
suited for — drive-train systems (such as batteries), comfort and safety systems (sensors, cameras, etc.), or information systems (car naviga-

tion units, ITS, etc.). Moreover, to move past justbeing supplementary part suppliers and potentially deepen their relationships as partners with
automakers and electrical/electronic architecture
venders, electronic device and component makers should develop the ability to offer cost competitiveness and new concepts. Such a strategy
requires firms to sharpen their ability to propose
automotive systems containing multiple semiconductors and electronic parts rather than discrete products in a way that is timed to the
mid-to-long-term technical development roadmaps of automakers. Automakers will see value
in this because it lessens their own development
costs. Another requirement for firms to be successful is to leverage their broad product lines
and effectively use their accumulated know-how
and design assets from consumer electronics inautomotive applications.

9

DC–DC converters are used to scale down the high battery voltages found on hybrid vehicles to the lower voltages
needed by onboard actuators.
Development Bank of Japan Research Report/ No. 61

11Figure 9. Automotive Semiconductors: Shares by Production Value and Shares by
Consumption Value (2006)
Production Value
Freescale
Semiconductor (U.S.)
10.5%

Gross value: 18.6 billion dollars

Infineon T echnologies(Germany) 8.5%
Others39.4%
ST Microelectronics(France/Italy) 8.0%

Renesas T echnology(Japan) 7.0%
NXP (Netherlands)
5.4%
Rohm (Japan) 2.5%

NEC Electronics(Japan) 5.3%

T oshiba (Japan) 3.8%
T exas Instruments(U.S.) 4.5%

Source:Robert Bosch(Germany) 5.2%

“Top 20 Companies Revenue from Shipments of Total Semiconductor — Automotive,”
Gartner, March 2007.

Consumption Value
Robert Bosch(Germany)
13.4%

Gross value: 18.6 billion dollars

Denso (Japan)
9.1%

Others41.9%

Siemens VDO
Automotive (Germany)
9.0%
Delphi Automotive(U.S.) 6.8%
Visteon (U.S.)
2.5%

Continental(Automotive)(Germany) 5.3%

Aisin (Japan)
2.7%
Autoliv (Sweden)
2.8%

Source:12

Mitsubishi Electric(Japan) 3.0%

Johnson Controls(U.S.) 3.7%

“Leading Automotive Companies’ Semiconductor Spending and Regional Consumption,
Worldwide, 2006,” Gartner, January 2008.

Development Bank of Japan Research Report/ No. 61

Figure 10. Strategies for the Electronic Device and Component Industry to
Expand Its Auto-Sector Trade
Is it really possible to be profitable? Increased costs areunavoidable to meet stringent quality requirements, even as
clients push for reductions in unit prices.

Some electrical/electronic architecture producers and finishedvehicle makers are involved in developing and manufacturing theirown automotive semiconductors (reasons for this include problems
with readily procuring semiconductors on the market).

The potential to increase shipment quantities is limited because
parts are often customized and are not conducive to horizontal
expansion.

↓↓

From the standpoint of electronic device and component makers,
these electrical/electronic architecture producers may become bothclients and competitors.

The auto sector is difficult to penetrate and the risks are
significant.

Both automakers and semiconductor/electronic component makers are searching for solutions.
How to build win-win relationships while maintaining an acceptable balance of competitionand collaboration“Complementary roles where we stay out of their areas of competence but we supply
semiconductors in areas they cannot cover on their own”

Strategies for electronic device and component makers to expand business inthe auto sector●Power semiconductors
These semiconductors are used for AC–DC conversions and for modulating
voltages. Power semiconductors are optimal for motor drives because they caneliminate power inefficiencies. They, however, require comprehensive strengths incooling technologies and substrate- mounting technologies.
●Sensors and cameras
Cars are expected to carry many more sensors and cameras in the future; however,
performance improvements and lower costs are needed urgently.
●Batteries
Batteries are transitioning from nickel – metal hydride to lithium-ion cells.
●Inverters, electric motors, alternators
Automakers are looking for smaller form factors, higher outputs, and cheaper costs.
●Noise suppression technologies

Source:Get a clear picture of the procurement policies of one’s direct auto-partsclients through day-to-day business practices
Spot as quickly as possible potential complementary product areas thatmatch up well with one’s fields of expertise and enhance one’s ability topitch products as automotive systems
Strengthen business ties as the development of new models begins bysynchronizing one’s timing with the mid-to-long-term technicaldevelopment roadmaps of automakers
Leverage one’s broad product lines and apply your accumulated know-how
and design assets from consumer electronics to automotive applications

Prepared by the Development Bank of Japan.

Figure 11. Auto-Sector Endeavors by Electronic Device and Component Makers
CompanyNEC

Murata Manufacturing

KyoceraHokuriku ElectricIndustry
ALPS Electric
TDK
Rohm
Nichicon
CMK
SMK
Mabuchi Motor
Mitsumi Electric

Field or Product• Purchased the automotive motor business of Valeo, a large French auto-parts maker (October 2006)→ NEC decided it was more effective to enter the auto sector by purchasing an established business and thus save the time it would take todevelop a proficiency in producing automotive motors and to establish sales channels to Tier 1 clients• Produces brushless DC motors for electric power steering and electric mirrors, and brush motors for air flows, body closures, power seats,
brakes, and steering• In a move toward commercializing rechargeable lithium-ion batteries, Murata agreed to a blanket business partnership with Enax and Daiken
Chemical to develop, design, manufacture, and sell lithium-ion batteries (September 2006)• Produces large-capacity ceramic capacitors for ECUs, hands-free Bluetooth modules, ultrasonic sensors for rear sonar units, MEMS gyrosensors
for navigation, hard-disk shock sensors, and noise suppression components• The natural advantages of lightweight, thermal-resistant ceramics are becoming more important as more and more ECUs are attached directly toengines, transmissions, motors, and elsewhere; in addition to its high-performance, highly reliable part technologies that are based on material
technologies, Kyocera is focusing on enhancing its module-level and system-level design, product development, and production technology
capacities• Produces crystal oscillators for ECU/TPMS modules, SAW filters and ceramic resonators for TPMS modules, SAW filters for keyless entry
systems, tantalum capacitors, and ceramic capacitors• Hokuriku is expanding in the auto sector both domestically and abroad; it beefed up its European operations and design-integration frameworks
in 2007• Produces humidity sensors, highly reliable printed circuit boards, and various sensors for rheostat applications• Produces in-car electrical modules and systems, automotive sensors, automotive digital radio tuners, automotive Bluetooth modules, ETC
modules, and sensor switches• Produces sensor-related products (NTC thermistors, humidity sensors, gear-tooth sensors, rotational sensors, etc.) and common-mode filters for
in-car LANs
• Produces very-low-resistance chip resistors, surge-protection chip resistors, chip tantalum capacitors, power modules for power supplies, power
supply ICs, LED drivers, smart-key ICs, LSIs for AIE, wireless audio link ICs, talking LSIs, power diodes, and power transistors• Produces HEV film capacitors, inverter modules, and aluminum electrolytic capacitors• Produces highly reliable single-sided, double-sided, and multilayer circuit boards, build-up multilayer circuit boards, and metal substrates• Produces force-feedback touch panels, connectors, remote controls, jacks, Bluetooth modules, and automotive camera modules• Produces motors for onboard electrical devices (for air-conditioner dampers, door locks and mirrors, power folding mirrors, power units, andoptical-axis adjustors)• Produces antennas, tuners, high-frequency modules, automotive sensors, camera modules, and other various components

Source: Dempa Shimbun (December 7, 2006), with some additional text.

Development Bank of Japan Research Report/ No. 61

13III Business-Relationship Transformations and Opportunities for
the Electronic Device andComponent Industry Brought on by
Car Electronics
The increasing adoption of electronics in automobiles is driving all manner of changes in thebusiness relationships in the auto-parts trade.
What sort of business opportunities will thesetransformations open up for the electronic device
and component industry? In this chapter we consider the anticipated business-relationshipchanges as well as potential business opportunities and challenges for the electronic device andcomponent industry from five viewpoints: (1)replacement of mechanical systems with electronic controls, (2) move to electric-powered cars,(3) progression of integrated LAN-based controls
and establishment of next-generation communication standards, (4) increasing efficiency inautomotive software development, and (5) advancement of multimedia and audio/video functions centered on in-car information terminals.
1.

Replacement of Mechanical Systems with
Electronic Controls

Automotive electronic controls have alreadysupplanted hydraulics, cables, and other mechanical systems in many different areas. This
technology turnover is having more than a passing influence on the business structures in theparts trade.
Air-conditioners are an illustrative exampleof this effect. Control units for manual
air-conditioners consisted of a number of wire
cables, which the driver would pull and pushwith slide adjusters to open and close ducts in the
air-conditioner unit to regulate the temperatureand flow of air. This configuration meant that thecontrol unit and the air-conditioner unit could be
separated and, thus, different companies could
develop each unit independently. With automatic
air-conditioners, however, the control functions
that maintain a constant temperature reside insemiconductors in the air-conditioner itself. According to a parts manufacturer in the business,
air-conditioner makers are now frequently asked
14

Development Bank of Japan Research Report/ No. 61

to build control modules as part of the automatic
air-conditioner units because of how important
software has become to the control system. Concealed in the move to car electronics, then, is theimpact of modularizing parts that previously had
been produced by separate manufacturers. Thisimplies that a supplier able to develop softwareand cope with the move to electronic controls
will have a leg up in dealings with automakers.
Similarly, more and more cars today use
electric power units to adjust seat positions andorientations. Power units occupy a large percentage of the total cost of seats, and the key devices in these units are the electric motors. According to one manufacturer, the number of motors used per seat is soaring as more functions
are added to seats. As a result, seat manufacturers’ trade with electric motor producers is growing year by year. From the viewpoint of the electronic device and component industry, thisrepresents a new business opportunity arisingfrom the shift to electronics. Potentially firms in
the future will deliver not just standalone motors
but also modular parts containing the motor with
peripheral circuitry and structural components.
On the other hand, those seat manufacturers thatcan produce the key electric components on theirown may be able to incorporate within their firm
the source of added value, which previously
flowed to their suppliers.
A third example is the cockpit module. The
cockpit module is the module fastened to across-car beam and carries the instrument panel,
air-conditioner unit, gauges and meters, airbag
modules, electronic control units, car audio systems, and other accessories. Much of the added
value found in cockpit modules is now concentrated in the displays and semiconductors as designs replace switches with touch panel controls(Figure 12). Cockpit module parts include someproduced in house and some sourced externally.
One cockpit manufacturer that does not make its
own displays purchases the automaker’s specified parts from a separate supplier, assembles theparts, and delivers them as a complete module.
And when it comes to incorporating audio control functions in the display panel, the manufacturer — which does not make its own audio devices either — develops the display panel jointlywith an audio device maker via the end auto-Figure 12. From Mechanical to Electronic: Cockpit-Module Case Study
Rising importance of displays in cockpit modules
ModuleAdded value is accumulating in displays and ECU
semiconductors as switch clusters are replaced with touch
panel controls.

Externallysourced
parts

Own
parts

Circumstances at module-parts maker A
Because it does not produce displays or audio systems on its
own, it purchases the automaker’s specified parts from aseparate supplier, assembles the parts, and delivers them as acomplete module.

When incorporating audio control functionsin the display panel, it develops the display
panel jointly with an audio device maker via
the automaker.

Concerned that the high percentage of sourced parts in its modules will squeeze its profit margins
regardless if sales increase→ Over the longer term it hopes to find a way to produce these parts.
(Although internal development resources and costs make it difficult in the short term)

Dependent on specified and supplied parts for
key devices↓
Limited leeway to reduce costs throughinnovation; cannot avoid lower profit ratios↓
Cost controls become important either byproducing key components internally or
through joint production.

Opportunities for the electronic device and component industry
Take display controls and functions beyond
car navigation and car audio; push thecoordination between display controls androadway infrastructure through radio
communications or ITS.

Opportunity to enter
the key automotive
segments related to
propulsion, stopping,
and turning

The electronic device andcomponent industry has strengths indisplay and radio communications
technology.
May be an effective way tosurmount barriers to the auto sector.

Source: Prepared by the Development Bank of Japan.

maker client. This manufacturer is concernedthat the high percentage of sourced parts in its
modules will limit its scope for innovation andsqueeze its profit margins regardless if sales increase. So although internal development resources and costs make it difficult in the shortterm, over the longer term the company hopes tofind a way to produce these parts on its own.
This is an excellent chance for the electronic
device and component industry to enter the
automotive power-train sector by pushing thecoordination between display operations andfunctions and roadway infrastructure throughradio communications or intelligent transportsystems (ITS). Going forward, this may be aneffective way for the electronic device and component industry, with its formidable technicaldevelopment capacities in the display and communications arenas, to surmount the barriers thathave so far kept it out of the auto sector.
2.

Move to Electric-Powered Cars: Batteries
Are the Core of Electric Power Systems

Most automobiles are powered by either gasoline
engines or diesel engines. HEVs, the subject ofgrowing demand in recent years, use afuel-combustion engine and electric motors to-gether as their power plant. With HEVs, however,comes the need to drive the air-conditioner compressor and other outboard accessories with electric motors, since they cannot be driven by theengine’s rotation when the car is running on electric motor power alone. Moreover, the successors
to HEVs — the next generation of eco-friendly
cars now being developed, such as fuel-cell carsand electric cars — drop the engine entirely andonly use electric motors. This creates the potential
for a sudden upswing in the deployment of electrical and electronic auto parts.
The heart of electric-power cars is the rechargeable
battery.
Powerful,compact,
long-lasting batteries are essential for HEVs,
electric cars, and fuel-cell cars alike. Some observers feel the market for HEV batteries, whichis growing rapidly, especially in Japan and North
America, will be worth more than ¥320 billion
by FY 2015.10 The mainstay of automotive batteries at the present time is the nickel – metal
hydride battery, but lithium-ion batteries —widely used in consumer electronics because of
their compact form factors and longevity — are10
According to materials for a briefing on its mid-term
management plan, GS Yuasa Corporation; see
http://www.gs-yuasa.com/jp/ir_pdf/2006-06-13.pdf.

Development Bank of Japan Research Report/ No. 61

15widely tapped as the technology of the future.
For lithium-ion batteries to be viable for automotive applications, however, they need to havegreater capacity, better quality control, andlarge-scale price reductions through economies
of scale (Figure 13).
Generally speaking there are three main approaches car companies take with respect to partsourcing: (1) create the parts using the automaker’s expertise, (2) develop the parts with an
external supplier, and (3) have an external supplier create the parts with its expertise. When it
comes to lithium-ion batteries — the powersource, which is to say a core car technology —automakers will surely want to take the first approach if at all possible and try to develop lithium-ion batteries on their own. But when it
comes to developing battery technology, thesecond approach — joint development configurations — is common, since electronic device
and component makers have a significant store
of expertise in this area from the consumer electronic field. Some automakers have been seen
constructing close business relationships in thisarea, even going as far as making capital investments (Figure 14).
One of the automakers investing in battery
technology is Toyota Motor, which is at theforefront of the HEV market. In 1996 Toyota set
up Panasonic EV Energy in partnership with
Matsushita Electric Industrial. This joint venturedevelops and produces nickel – metal hydride
batteries and lithium-ion batteries used in thePrius and other cars. Recognizing that in order toaccelerate HEV development it needed to integrate development of conventional battery technology with in-car system technology, Toyota in2005 flipped Panasonic EV Energy’s holdings
ratio from 60/40 in favor of Matsushita Group to
60/40 in favor of Toyota (Figure 15).11
Nissan Motor formed a fifty-fifty joint venture with NEC and NEC-Tokin in 2007 called
Automotive Energy Supply Corporation with aplan to supply lithium-ion batteries for cars by
FY 2009. Automotive Energy Supply Corporation, as an independent corporation, intends tosell batteries to other carmakers besides Nissan.12
11
Press release, Toyota Motor; see
http://www.toyota.co.jp/jp/news/05/Oct/nt05_1008.html.
12
Joint press release by Nissan, NEC, and NEC-Tokin; see

16

Development Bank of Japan Research Report/ No. 61

Nissan plans to deliver its own branded hybrid
car by 2010 and a next-generation electric car in
the early 2010s. To this end, Nissan has launched
a dedicated firm in partnership with NEC Groupin order to lower its costs and deal directly withvolume production.13 NEC Group, for its part,plans to supply expert lithium-ion battery
knowledge and resources built up through theexperiences of NEC-Tokin in its consumer-electronics battery business.
There are examples of electronic device
manufacturers taking majority investor positions
in lithium-ion battery development. The GS
Yuasa Group, seeking to expand applications for
its lithium-ion battery technology, established
Lithium Energy Japan at the end of 2007 in
partnership with Mitsubishi Corporation, whichaims to enter the battery business and create periphery businesses, and Mitsubishi Motors,
which hopes to popularize electric cars as theultimate in eco-friendly vehicles. Lithium Energy
Japan plans to be producing 200,000 batteries ayear by FY 2009.
Another camp of electronics manufacturers
foregoes capital ties to any specific automaker.
Hitachi, with Shin-Kobe Electric Machinery and
Hitachi Maxell, set up Hitachi Vehicle Energy in2004. Hitachi Vehicle Energy has core competencies in all three key components of HEVs — electric motors, inverters, and batteries — and candevelop, design, and manufacturer all three aswell as offer optimized systems. The company has
already sold a total of 200,000 cells to date thatare being used by a number of car companies.14

http://www.nissan-global.com/JP/NEWS/2007/_STORY/07
0413-01-j.html.
13
Renault and Nissan Motor announced in January 2008
they, in partnership with a U.S. venture enterprise, had exchanged a memorandum of understanding with the Israel
government to supply electric cars and electric vehicle recharging stations to Israel in 2011. Project Better Place,based in California, will construct and operate 500,000
electric vehicle recharging stations across Israel. Nissan,
through a joint firm with NEC, will develop andmass-produce battery packs that meet the requirements ofthe electric cars. See
http://www.nissan-global.com/JP/NEWS/2008/_STORY/08
0121-02-j.html.
14
Press release, Hitachi; see
http://www.hitachi.co.jp/New/cnews/month/2008/01/0121.html.

Figure 13. Long-Period Transitions in Rechargeable Battery Sales by Value(in billions of yen)
7,000
700

600
6,000
600
5,000
400
4,000
300
3,000
2,000
200

100
1,000
0
1986
Lead

1990

1994

Nickel-cadmium

1998

2006 (Year)

2002

Nickel-metal hydride

Lithium ion

Other

Source: Battery Association of Japan.

Figure 14. Rechargeable Batteries, the Core of Electric-Powered Cars
Core of electric-powered cars = rechargeable batteries
Powerful, compact, long-lasting batteries are essential for HEVs,
electric cars, and fuel-cell cars alike
The market for HEV batteries, which is growing rapidly, especially inJapan and North America, is predicted to exceed ¥320 billion by FY
2015.

Automakers’ approaches to part sourcing(1) Create using the automaker’s expertise(2) Develop jointly with an external supplier(3) Have an external supplier create with its
expertise

Lithium-ion batteries … the power source, which is to say a core car
technology → automakers will want to try (1) to develop the batteries on
their own if possible

For lithium-ion batteries, which are already widelyused in consumer electronics, to be viable for
automotive applications they need to have greater
capacity, better quality control, and large-scale pricereductions through economies of scale.

but,when it comes to developing battery technology → (2) joint development
configurations are common, since electronic device and component
makers have a significant store of expertise from the consumer electronic
field.
Some automakers have been seen constructing close business
relationships in this area, even going as far as making capital investments.

Source: Prepared by the Development Bank of Japan.

Development Bank of Japan Research Report/ No. 61

17Figure 15. Alliance Strategies in Automotive Batteries
Electronic Device andComponent Makers

Carmakers
1996

Toyota Motor
Daihatsu Motor60%

Panasonic EV
Energy40%

Matsushita ElectricIndustrial

Hino Motors
Isuzu Motors
NECFuji Heavy
d
i

2007
50%

Automotive Energy
Supply Corporation

NEC-Tokin
50%

Nissan Motor
51%

2007
15%
Mitsubishi Motors

Lithium
Energy Japan34%

GS Yuasa Group
Mitsubishi
Corporation

Sanyo Electric
Honda
Hitachi

2004
Hitachi Vehicle
EnergyShin-Kobe Electric
Machinery

Mazda

Hitachi Maxell
Murata Manufacturing
Investment
Enax

Daiken Chemical

Panasonic EV Energy: automaker is the majority investor
Automotive Energy Supply Corporation: 50/50 joint venture
Intends to sell batteries to other carmakers besides Nissan as an independent corporation
Nissan・ Deliver its own branded hybrid car by 2010 and a next-generation electric car in theearly 2010s
・ Partnership with NEC Group permits Nissan to lower costs and deal directly withvolume production

NEC・ NEC-Tokin has considerable experience through its consumer-electronics battery business・ Uses manganese as an electrode material (Manganese is attractive because it produces less heatthan cobalt or nickel, so manganese batteries are less likely to ignite, and its known reserves areroughly 60 times those of cobalt.)

Lithium Energy Japan: led by an electronic device manufacturer• GS Yuasa Group → seeks to expand applications for its lithium-ion battery technology• Mitsubishi Corporation → aims to enter the battery business and create periphery businesses• Mitsubishi Motors → hopes to popularize electric cars as the ultimate in eco-friendly vehicles

Non-aligned camp of electronics manufacturers without capital ties to any specific automaker
Hitachi Vehicle
EnergyCompetent in developing electric motors, inverters, and batteries aswell as offering optimized systems

SanyoElectric

Developing a business model that strives to advance technology and quality
and that seeks returns from products while maintaining a distance fromdomestic and foreign automakers

Weighing the pros and cons of forming a partnership■ Securing stable buyers is essential in mitigating the risks of prior investment needed to develop nextgeneration vehicles → The ideal: development of products together with a specific automaker and then
expansion of business horizontally to other clients■ Joint-venture contracts likely contain clauses restricting horizontal expansion■ Awareness as a partner that if jointly developed products are sold early on to other companies, thendifferentiation in the marketplace will be difficult to maintainSource: Prepared by the Development Bank of Japan from company press releases.

18

Development Bank of Japan Research Report/ No. 61

Sanyo Electric, though it has ties in technical development of HEV batteries with Ford,
Honda, and Volkswagen, is another player in thiscamp. Sanyo’s policy is “to develop a businessmodel that strives to advance technology andquality in our own way and that seeks returns
from products while maintaining a distance”
from domestic and foreign automakers.15
Other new entrants have also been coming
on board. Murata Manufacturing, a large electronic component maker looking to get into thebattery business early on, received existing lithium-ion battery technology from battery-maker
Enax and formed a blanket business partnershipwith Enax and a third party, Daiken Chemical.
This partnership aims to construct R&D andvolume production frameworks.16
As these examples show, many of the lithium-ion battery business tie-ups between automakers and electronic device and component
producers are founded on joint development andinclude joint capital investments. These joint
capital investments take many forms: in somecases the automaker is the majority investor,others are fifty-fifty investments, and in stillother cases the battery maker is the lead investor.
There are even companies that are going it alone
without investment from any carmaker; such
firms aim to build broad trading relationships
with multiple carmakers.
From the view of the electronic device andcomponent industry, securing stable buyers isessential in mitigating the risks associated withthe prior investment needed to develop
next-generation vehicles. The ideal situation forthese firms is to develop products together with a
specific automaker and then expand their business horizontally to other clients. Complicating
this ideal, however, is the fact that joint-venturecontracts are likely to contain clauses restricting
horizontal expansion. And as a partner, the firms
are probably aware that if jointly developed
products are sold early on to other companies itwill be difficult to maintain differentiation in themarketplace. How firms weigh the pros and consof building partnerships based on expected shipping quantities and technical synergies is thought
to contribute to the differences found in eachcamp’s corporate alliances in the lithium-ion
battery business.
While Japan has held an overwhelming advantage to this point in the lithium-ion field, aseries of U.S. venture enterprises, including
A123 Systems, EnerDel, Valence Technology,
and Altair Nanotechnologies, have been entering
the arena (Figure 16). 17 General Motors andA123 Systems, which was established by researchers from MIT, are jointly developing lithium-ion batteries for plug-in hybrid vehicles(PHV), which can be recharged from household
power supplies. This group plans to roll out thefirst PHVs by 2010. Technical innovation in batteries, including upstream materials, is dizzying,and new entrants in the field are not standing pat.
Japanese automakers and electronic device andcomponent makers will have to keep a close eyeon the latest developments around the globe andlook for cross-border alliances with foreign corporations as necessary.

15

From an interview with Sanyo, Dempa Shimbun, January
8, 2008 edition, page 5.
16
Press release, Murata Manufacturing; see
http://www.murata.co.jp/news/2006/060919.pdf.

17Wall Street Journal, January 11, 2008 edition. Delphi, amajor U.S. auto-parts vender, is invested in EnerDel.

Development Bank of Japan Research Report/ No. 61

19Figure 16. Robust Lithium-Ion Battery Development in the U.S.
U.S. university venture A123 Systems
EnerFuel
Cells for proton exchange
membrane (PEM) fuel cells
NanoEner(Nanotechnology)• Started with assistance from the U.S. Department of Energy• Jointly developing lithium-ion batteries with GM• Successfully raised about 130 million dollars frominvestment funds and other sources

Ener1 Group(Investment company)
2004

Ener1
(Alternative energy
development)

Itochu80%

20%

EnerDelDelphi

Institutional
investors

Source: Prepared by the Development Bank of Japan from corporate Web sites.

3.

Progression of Integrated LAN-BasedControls and Establishment of
Next-Generation Communication Standards
Automotive safety technology is transitioning
from passive safety, which includes the use of
airbags and seatbelts to reduce injuries in theevent of an accident, to active safety, which anticipates dangerous situations and acts to avoid
accidents. Some luxury cars already feature
pre-crash safety systems. These systems use millimeter-wave radar and cameras to detect pedestrians or vehicles in front of the car. When thesystem determines a collision is possible, it alerts
the driver with an audible tone. If the driver does
not brake, the system will apply the brakes toreduce the impact speed and, should a collision
be imminent, will tighten the seatbelts just before
impact to lessen the severity of injuries. Other
technologies are being put into practice that stabilize the vehicle’s position on the road along
curves by integrating control over the engine,braking, and steering functions: functions that
previously were controlled independently. Beyond this, hopes are high for x-by-wire systems,
which use in-car network technology, to realize
even further integrated controls (Figure 17).
X-by-wire is a technology that replaces
braking and steering controls that are conveyedmechanically using hydraulics or cables with
controls that are conveyed electronically using

20

Development Bank of Japan Research Report/ No. 61

electrical wiring and electric motors. Reliable,
high-speed communications technology is necessary to make x-by-wire practical. Europeangroups, such as BMW and Bosch, have taken thelead in this area and are moving ahead with thedevelopment of FlexRay, a new in-car LAN
standard (Figure 18). In Japan, manufacturers
came together to form Japan Automotive Software Platform and Architecture (JasPar) in 2004
to develop FlexRay. JasPar is a cross-industry
standardization body with 112 corporate members (as of September 2007), including 12 automakers, 33 electrical/electronic architecture
manufacturers, 42 software-tool venders, 15
electronic device and component producers, and10 general trading companies.
Although the development of integrated
control functions through network technology is
a competitive area for all firms, the auto industry
has determined that communication standards,
which are the foundation of integrated controls,
will not be an area of competition. The industry’s
intention is to efficiently develop communication
standards jointly with the IT and electronics industries. The IT and electronics industries, by
getting in on the ground floor in standardizing
in-car LAN protocols, are believed to be seeking
to capture strategic positions that will allow themto expand their trade with the auto industry in the
integrated control market.

Figure 17. Progression of Integrated LAN-Based Controls and Establishment of
Next-Generation Communication Standards
Automotive safety
technology
Passive Safety
Reduces injuries in theevent of an accident(airbags, seatbelts)

Hopes for x-by-wire technology
Active Safety
For even further
integrated controls…

Anticipates dangerous
situations and acts to avoid
accidents

Technology that replaces braking and steering controls that areconveyed mechanically using hydraulics or cables with
controls that are conveyed electronically using electrical wiringand electric motors
Requires reliable, high-speed communications technology to bemade practical

Pre-crash safety systems
Use millimeter-wave radar and cameras to detect vehicles, objects,
or pedestrians in front of the car. When the system determines thepotential for a collision is high, it alerts the driver with an audible
tone. If the driver does not brake, the system will apply the brakes
to reduce the impact speed and, should a collision be unavoidable,
will tighten the seatbelts just before impact to lessen the severity of
injuries.
Integrated controls take a systematic view of engine, braking, andsteering functions: functions that previously were controlled
independently
Stabilizes the position of the vehicle on the road when the systemsenses the vehicle is about to skid sideways on a slippery curve. The
system controls skidding by controlling the engine’s power output
and the brakes, and directs the front wheels’ path with an integrated
steering control.

↓
Development of FlexRay, the next-generation in-car LAN
technology(Led by BMW, Bosch, and other European companies)
Japan Automotive Software Platform and Architecture (JasPar),
set up in 2004 as a Japanese standardization bodyLS460
V8 4,608cc engine
World’s first eight-speed
automatic transmission
Base price: ¥7.70 million to¥9.65 million

Competitivearea

Noncompetitive area

Application

Application

Application

Application

SW platform
ECU

SW platform
ECU

SW platform
ECU

SW platform
ECU

For the auto industry■Companies will compete inapplications that make use ofcommunication functions.
■Underlying communication
standards will not be an areaof competition → intention todevelop communication
standards jointly with the IT
and electronics industries.

For the IT and electronics
industries
Get in on the standardization
ground floor in the in-car
LAN field.

↓
Capture strategic positions
ahead of building business
relations with the auto
industry in the promising
integrated control market.

High-speed, high-capacity multiplex communications (FlexRay)

Source: Prepared by the Development Bank of Japan from the Toyota Motor and JasPar Web sites.

Figure 18. Comparison of In-Car LAN Protocols

Official namePrimary developer

Transmission speeds
Channels
Communication method
Applications /pros and cons

LIN
Local Interconnect Network
LIN Consortium (consisting
primarily of European
automakers)
Slow (20 Kbit/s)
1
Event-triggered• Excellent cost performance inthe slow-speed region• Light controls, door-mirror
controls, etc.

CAN
Controller Area Network
Robert Bosch

Medium (1 Mbit/s)
1
Event-triggered• Popularized as the current
global standard (widely used in
key networks, power-trainsystems, and structural systems)• Because it is an event-triggered
format, unpredictable delays canoccur easily when multiple
events are communicated at one
time

FlexRay
FlexRay
FlexRay Consortium (consisting
primarily of European
automakers)
Fast (10 Mbit/s)
1 or 2Time-triggered• Being pushed for standardization as the in-car LAN protocol
for next-generation x-by-wiresystems, because of its highspeed and high reliability due to
its redundant communication
channels

Source: Prepared by the Development Bank of Japan from various materials.

Development Bank of Japan Research Report/ No. 61

21

The move to using more electronic controls in
cars, and increasingly integrating those controls,
is causing the burden — and the cost — of developing ECU-embedded software to soar. The
quality of in-car software has a profound impact
on technologies that aim to add more value toautomobiles, namely through better fuel economy performance and safety. Consequently, newcorporate alliances are being sought that canerect frameworks that permit efficient softwaredevelopment.
Until recently in Japan, engineers from Tier
1 suppliers have generally worked with theautomaker right from the initial phase to develop
the key parts for a new car model. Parts makers
frequently create detailed designs working fromthe automaker’s base specifications. Development operations are divvied up between the twosides according to their relative strengths, and thetwo sides piece together any overlapping issues.
There is a strong tendency with ECUs as well to
optimize development for specific functions —engine, brakes, or steering; very often ECU development is left in the hands of a few skilledindividuals. But this conventional development
methodology is quickly reaching its limits.18 As
controls become more deeply integrated, any
single change to the software has telling consequences for the entire system. Throw in theworsening shortage of engineers and you have asituation where no automaker can handle ECU
integration by itself. Even so, automakers arealso increasingly aware they must take the initiative in joint software development; the natural
rivalries among parts makers rule this out.
The auto industry is considering an approach whereby it would standardize software in
the platform field and leave the application field
for individual firms to try to differentiate theirvehicles’ functions. In this concept, the common
platform would allow carmakers to realize integrated controls faster and cheaper than developing everything from scratch, because they only

have to develop individual applications, for example, for brakes or for suspension. Daimler,
BMW, Bosch, and others in Europe have alreadylaunched Automotive Open System Architecture(AUTOSAR), which aims to find common standards for in-car software and electrical/electronicarchitectures.
The fundamental question for platform development is where to draw the line between
what is standardized and what is open to interpretation, and thus differentiation. It may be instructive to see how the mobile-phone sector
dealt with this problem in its joint standards development. Renesas Technology — a large
semiconductor manufacturer — worked in tandem with NTT DoCoMo, Fujitsu, Mitsubishi
Electric, and Sharp to develop a mobile-phoneplatform that packaged a reference chip set and abasic software suite consisting of the operating
system, middleware, drivers, and other assorted
programs. This platform has been incorporated inhandsets produced by Fujitsu, Mitsubishi Electric,
Sharp, and Sony Ericsson.19 Taking advantageof the common platform has helped handset
makers in three ways: it spares them from developing all the basic mobile-phone functionsindividually, cuts development times and costs,
and simplifies handset differentiation andmodel-line expansion.
It is not exactly fair of course to lump mobile phones and automobiles together since theirdevelopment processes are dissimilar, but thesalient point remains that standardization will not
progress without someone seizing the initiative.
Automakers are indeed the main players in thein-car software field, but there are expectations
electronic component and device manufacturers
will also take an active role in platform development, instead of taking a passive stance, if
only because it improves their chances of involvement in later application development.
In another sense the movement to standardize ECUs, which previously were developed individually for each application, and to integrate
key ECUs can be regarded as a new offshoot of
the modularization trend. Past modularization
centered on the assembly and integration of me-

18“Current Trends in Automotive Control Software,” Takashi Shigematsu; see Toyota Technical Review Vol. 49,
No. 2.

19
Press release, Renesas Technology; see
http://japan.renesas.com/media/company_info/news_and_ev
ents/press_releases/2007/1211/20071211j.pdf.

4. Increasing Efficiency in Automotive Software Development: The “Tripolarization” ofSuppliers22

Development Bank of Japan Research Report/ No. 61

chanical parts. But it is now becoming a trend at
the ECU and software level, evidenced by theappearance of new modules whose core is electronics, such as battery modules and electricmotor units. Given the increasing deployment ofelectronic-centric modules and given the evolution of virtual functional integration throughnetwork technology that joins these modules together, some observers feel the partitioning ofmodules must be rethought.20 In the near future,auto-parts makers may well be “tripolarized” into
three separate camps: (1) those with the development capacity to integrate entire systems including platforms, (2) those that develop applications and mechanical subassemblies based on
established platforms and specifications, and (3)those that specialize in mechanical development
and do not get directly involved with ECU development.
This third group of mechanical specialists
faces the greatest threat from deteriorating business conditions. It is crucial these suppliers breaktheir dependence on external procurement ofsemiconductors and electronic parts where much
structural control expertise is accumulated. To dothis they must leverage their mechanical control
expertise, proactively build their own partnerships with electronic component and device
makers, and regain the initiative in system integration and cost controls. It is likely we will see
more auto-parts makers buying software businesses since software development has become avital factor in maintaining competitiveness inmodules. Another change we are witnessing is
the collapse of the conditions that allowed all
automakers to nurture cross-held parts makers;
automakers increasingly expect parts makers tobuild alliances on their own.
Although the electronic component and device industry recognizes it must aim to deliver
modules to raise the profitability of its in-car
business, industry firms are concerned they cannot move beyond discrete component sales because they lack expertise in automotive control
systems. Nevertheless, there is thought to beplenty of potential to form win-win relationships
with the auto industry by engaging in
far-reaching communications with automakers
and sharing technology roadmaps (Figure 19).

Figure 19. Raising the Efficiency of In-Car Software Development■ Reduce the unit cost of ECU systems → Integrate multiple ECUs

New offshoot of modularization

4 standard groups~60 units• Increasing deployment of new electronic-centricmodules (battery modules, electric motor units, etc.)

Consolidation
throughrevisions offunctionalgroupsActivities to reduce unit costs of systems
incorporated in design concepts• Power train controls• Multimedia• Structural controls• Safety controls• Evolving virtual functional integration through network
technology↓
Need to rethink module partitioning*ECU = electronic control unit
Source: Toyota Motor.

Tripolarization of auto-parts makers(1) Those with the development capacity to integrate entire systems
including platforms

Electronic component and device industry aims todeliver modules but cannot move beyond discrete
component sales because of a lack of expertise inautomotive control systems↓• Far-reaching communications with the auto industry• Sharing of technology roadmaps

Win-winrelationships(2) Those that develop applications and mechanical subassemblies basedon established platforms and specifications… advance of car electronics threatens their position as Tier 1
suppliers(3) Those specializing in mechanical development who do not get directly
involved with ECU development… need to leverage their mechanical control expertise, proactively
build their own partnerships with electronic component and device
makers, and regain the initiative in system integration and cost
controls

Source: Prepared by the Development Bank of Japan.

20“Modularization Strategies of Japanese Automakers andComparisons with U.S. and European Manufacturers,”
Takefumi Mokudai and Fujio Iwaki (2007), presented at the
Asia-Pacific Automotive Forum, Tokyo 2007.
Development Bank of Japan Research Report/ No. 61

23

5. Advancement of Multimedia andAudio/Video Functions Centered on In-Car
Information Terminals
Aside from electronics for control and structural
systems, a third avenue of car electronics surging
forward is multimedia and audio/video electronics. In-car multimedia and audio/video electronics add to the convenience and enjoyment ofdriving. Leading car companies have alreadylaunched services connecting car navigation
units and mobile phones wirelessly (with Bluetooth) to offer destination settings and information on neighboring attractions. And with theoncoming establishment of ITS and other public
infrastructures, carmakers hope to commercialize
services that control cars in conjunction with
map and road information and diagnose faults
remotely based on stored data on past driving
conditions. Essential to bringing about these expectations, however, will be coordinated control
of in-car information terminals with the vehicle’s
control and structural systems.
NEC and NEC Electronics in December
2007 announced they were developing a microprocessor and operating system for a nextgeneration in-car information platform in partnership with Toyota Motor, Aisin AW, andDenso (Figure 20). The companies claim thisdevelopment will shorten design cycles, ensure
the continuation of developed software assets,
and simplify revisions and applications. The
three automobile-related companies plan to proceed with development with a target of incorporating the technology beginning in 2010 in
Toyota cars outfitted with multimedia informa-tion devices. They are also aiming to make theirtechnology into an industry standard and thereby
get other automakers and IT corporations to
adopt it.21 While automakers are certainly thecentral players in development for the environment and safety sectors, they are said to favor
repurposing advanced consumer-level multimedia and audio/video technology for automotive
applications. This means there is plenty of leeway for electronic device and component producers to take the lead in developing in-car information terminals. It is expected they will actively put forth proposals in this area.
Internet-vehicle convergence is another area
gathering widespread attention. If car navigation
units can connect to the Net, drivers and passengers will be able to look up nearby attractions
and book hotel accommodations much more easily than now. On-demand music and video will
also become possible. For car companies, enhanced in-car entertainment will make cars more
attractive and easier to pitch to consumers. Certainly questions about greater communication
volumes and more base-station installations must
be addressed to ensure stable Internet connectivity during highway driving. But backers of
WiMAX — a next-generation high-speed wireless communication technology now in development — say that if the technology is employed
along highways, uninterrupted Net connections
will be possible while driving. We have seen
carriers actively collaborate with Google, Yahoo,
and other Internet companies as Net access frommobile phones was rolled out on a wide scale.
Similarly, the potential is there for closer ties
with Net companies in the auto sector.

21

NEC Electronics Web site; see
http://www.necel.com/news.ja/archive/0712/1103.html.
24Development Bank of Japan Research Report/ No. 61

Figure 20. Advancement of Multimedia and Audio/Video Functions Centered on In-Car
Information Terminals
Establishment of ITS and other public infrastructures↓
Control cars in conjunction with map and road information
Remote diagnostic services based on stored data on past driving conditions
Coordinated control of in-car information terminals withthe vehicle’s control and structural systems is essential

Moving forward…
Internet-vehicle convergence
WiMAX (a next-generation high-speed wirelesscommunication technology)
・ Uninterrupted Net connections will be possible whiledriving・ Potential for closer ties with Net companies in theauto sector (Google, Yahoo, etc.)

December 2007
NEC and NEC Electronics announced they were developing a microprocessor and operating system for a next-generation in-car information platform in partnership with Toyota
Motor, Aisin AW, and Denso→shortens design cycles, ensures the continuation of software assets, and simplifies revisions and applications
・ Automakers are the central players in development for the environment and safety
sectors
But they repurpose advanced consumer-level multimedia and audio/video technology
for automotive applications
・ Electronic device and component producers have plenty of room to take the lead andactively put forth proposals for the development of in-car information terminals
Source: Prepared by the Development Bank of Japan.

Development Bank of Japan Research Report/ No. 61

25

IV The Auto Sector and Emerging
Distributed Business Models in theElectronic Device and Component
Industry
Dell and others have risen to prominence in thecomputer industry by outsourcing production to
low-cost manufacturers in Taiwan and other locations, leaving them to focus on design, development, and sales in order to differentiate theirbrand through design and distribution. That thisis possible is partly due to the fact that key
semiconductor components by Intel and operating systems by Microsoft are sold as industry-wide standard products, which compels
computer makers to rely on external venders fordevice-control expertise. A similar trend is seen
in LCD TVs, one of the hottest digital consumer
products, where the presence of U.S. fablesscompanies such as Vizio is on the rise. Theirbusiness model is to purchase panels and semiconductor chip sets from third-party venders andoutsource assembly. Japan’s vertically integrated
TV makers in most circumstances produce theirown system LSI chips — the key devices forvideo and audio processing. But the worldwide
trend is moving toward distributed businessmodels, in which fabless semiconductor companies specialize in circuit design and software development while semiconductor foundries produce devices to order taking advantage of theircost competitiveness derived from large-scale
investment (Figure 21).
In this way electronics firms are selling theirdevice-control expertise to other firms. It is becoming possible to create at least commodity-level products by assembling inexpensive
parts procured around the world. The distributed
business model is becoming more persuasive not
only at the end-product level but also, as we willsee below, at the level of semiconductors, wherecontrol expertise is embedded.
So, as semiconductors become key devices
in cars, is it possible for distributed businessmodels to take root in the auto sector, as they
have in computers and digital home electronics?
The short answer: probably not (Figure 22).
The functions of cars are realized throughthe integration of tens of thousands of parts,

26

Development Bank of Japan Research Report/ No. 61

which requires the special expertise of the automaker. Thus, even when automakers do consider
adopting distributed frameworks to develop
in-car software, the primary objective is to makeprogress on the structural and hierarchal fronts tocope with ballooning software development
volumes. But automakers are expected to remain
the central players in upstream areas — overallsystem design based on automotive-control
know-how and the partitioning of software andhardware.
There are several reasons for this. Automakers prioritize reliability over cost when it
comes to automotive semiconductors and therequired quality levels are a magnitude higher
than those for consumer electronics. This makes
it necessary to have specialized development
frameworks and production controls that are
finely tuned to automotive applications. Another
difference from the consumer electronics business is product turnaround. Whereas cycles ofjust six months are common in consumer electronics, automotive applications require securesupplies for at least ten years or so. And sincemost products are customized, there are limits on
their production volumes. This is why verticallyintegrated semiconductor companies — whichhandle design, development, and production in acomprehensive fashion — have the advantage inautomotive semiconductors. Full adoption offabless-foundry models is seen to be difficult, at
best.
What is considered more likely are takeovers by electronic device and component makers of Tier 1 auto-parts producers. If throughstrategic acquisitions electronic device andcomponent makers can obtain some control expertise in automotive engines or power trains,
they will be capable of offering systems that fusemechatronics with electronics, which will promote their standing with automakers. Corporate
alliances could also be altered by the advancement of digital controls — brought about bytechnical innovation in automobiles — that are
fundamentally different from the knowledge
capital automakers possess. Electric cars, which
are acclaimed as the future incarnation of thepassenger vehicle, are seen as having the potential to revolutionize automotive systems.

Figure 21. Emerging Distribution Business Models in the Electronic Device andComponent Industry
Computers・Intel and Microsoft sell their semiconductors and operating systems, respectively,
to other firms as industry standard products
・ Computer makers rely on external venders for device-control expertise→ Prominent manufacturers (Dell) outsource production to low-cost
manufacturers in Taiwan, leaving them to focus on design, development, andsales

LCD TVs・ Vizio, a rising presence in the U.S., has a business model in which it purchases
panels and semiconductor chip sets from third-party venders and outsources
assembly
・ Key system LSI devices… migrating to a fabless-foundry distributed business model

Electronics industry
・ Embeds device-control expertise in semiconductors and sells
to other firms
・ Possible to create at least commodity-level products byassembling inexpensive parts procured around the world

Fabless company
U.S. orEuropePlanning anddesign ability
IPStandardization

International
specialization

Specialization

Foundry
Asia
Produce to order
Large-scale
investment

Low cost

Japan
Comprehensive electronic device andcomponent manufacturer
Verticallyintegrated
model
Firm
A

Design anddevelopment

Firm
B

Production

Sales

Firm
Y

Firm
Z

Source: Prepared by the Development Bank of Japan.

Development Bank of Japan Research Report/ No. 61

27

Figure 22. Potential for Distributed Business Models in the Auto Sector
Automobiles
・ Functions of cars are realized through the integrationof tens of thousands of parts, which requires the
special expertise of the automaker・ Adoption of distributed frameworks to develop in-car
software→ Objective is to make progress on the structural andhierarchal fronts to cope with ballooning softwaredevelopment volumes

Automotive
semiconductors

Upstream areas, such as

・ Overall system design based on
automotive-control know-how

・ Partitioning of software and hardware↓
Automakers to remain the central
players

・ Vertically integrated semiconductor

・ Prioritize reliability over cost・ Quality requirements are a magnitude higher thanthose for consumer electronics

companies — which handle design,development, and production in acomprehensive fashion — have theadvantage in automotive
semiconductors

・ Requires specialized development frameworks andproduction controls tailored to automotive
applications

・ Full adoption of fabless-foundrymodels is seen to be difficult

・ Responsible for about 10 years supply
・ Many custom products with limited production
volumesMore feasible changes in corporate
relationships are
Takeovers by electronic device and component makers ofTier 1 auto-parts producers
Obtain some expertise in automotive controls↓
Able to offer systems that fuse mechatronics withelectronics
Progression of digital controls in automobiles
Electric cars?

Source: Prepared by the Development Bank of Japan.

28

Development Bank of Japan Research Report/ No. 61

V Directions for Car Electronics
in the Promising Low-Cost Auto
SectorAuto sales in the four BRICs countries — Brazil,
Russia, India, China — now accounts for 17
percent of the 62.85 million vehicles soldworldwide; more than 10.70 million cars werebought in these four countries in 2005 (Figure23). If current growth rates continue, the BRICs
car market is predicted to become the world’s
largest in the early 2010s, eclipsing the U.S.
market of about 17.00 million vehicles.
More than half of BRICs sales occur in
China, which bought 5.76 million vehicles in2005. Although only 1.43 million vehicles weresold in India, India’s annual growth rate over2003 to 2005 hit 15.2 percent, overtaking
China’s 14.5 percent expansion.22 Other than in
China, future auto-sales showdowns are expected
to take place in India, the Middle East, Africa,and other developing regions.
The photo in Figure 24 shows the Nano, a
one-lakh car (one lakh equals 100,000 rupees, orabout ¥280,000) developed by Indian automaker

Tata Motors, at the Ninth Auto Expo in New
Delhi, India, held in January 2008. The
four-passenger Nano is powered by a 623 cubic
centimeter, two-cylinder engine that delivers 33
horsepower. With a length of 3.1 meters, a widthof 1.5 meters, and a height of 1.6 meters, theNano is comparable to Japanese mini-compacts,
although it has a shorter overall length.
Automobiles are still out of reach for thevast majority of Indians not from the tiny
wealthy minority. Motorcycles and scooters are
the most popular means of easy transport. At aprice of just under 40,000 rupees, two-wheelers
are affordable on the average worker’s monthly
income of about 10,000 rupees (approximately¥28,000), provided a loan can be arranged.
The cheapest Nano, however, with a pricetag of about half that of Maruti Suzuki India’s
best-selling Maruti 800, will potentially turnmotorcycle users into new car buyers. Tata’s offering, along with Hyundai Motor, Renault, andothers announcing they will roll out vehicles inthe 3,000 to 5,000 dollar range, highlights theincreasing competition among global carmakers
to develop low-cost cars, which will become theprime battleground in the coming years.

Figure 23. Automotive Sales in the U.S., Japan, and BRICs by Volume(in millions of vehicles)
20
BrazilRussia
India
China
Japan
U.S.

18
16
14

U.S.

12
10

Brazil8

Russia

6

India

4
Japan
2

China

0
2003

Source:

2004

2005

(Year)

Japan Automobile Manufacturers Association.

22

Growth rates over the same period in Russia and Brazil
were 12.6 percent and 9.6 percent, respectively.
Development Bank of Japan Research Report/ No. 61

29

Still it is no easy matter to develop cars inthe ¥300,000 to ¥500,000 range and maintainquality and a brand image. Moreover, in the Indian market, even the lowest priced cars mustpossess proper environmental and safety performance to meet India’s progressively toughening automotive environmental and safety standards. 23 To produce cars this cheaply priced,
costs apportioned to parts and materials are believed to be kept tightly in check, meaning electrical components, which have to pass legal requirements, are kept to a bare minimum.
In this environment of razor-thin profit
margins, it is important that electrical/electronicarchitecture manufacturers earn by selling involume — through diversification and expansionof their customer base — and cutting costs substantially by changing materials, reducing
amounts of materials used, and improving production processes. Japanese manufacturers arealso believed to have room in India to construct
efficient diversified frameworks between Japanand India to develop embedded software andthus take advantage of the huge local pool of inexpensive, well-trained IT engineers (Figure 26).
An approach Japanese parts manufacturers

should explore is cooperating or forming partnerships with Western or local parts manufacturers already in these emerging markets to lower
their risks. One example of a company taking
this approach is Germany’s Bosch, which is expending considerable resources on developing
expertise in providing electrical architectures atcompetitive prices in India and other emerging
markets. Bosch, in partnership with a local Indian manufacturer, is pursuing development of
an electronically controlled diesel/gasoline direct-injection system as well as tackling the development of in-car networks for local automakers.24
Only a small percentage of cars in developing countries are equipped with safety accessories such as ABS or airbags or options such as
air-conditioners, music systems, or car navigation units because the current prices are high. Yet
there are definite latent needs for increased
safety and comfort. The first electrical/electronicarchitecture manufacturers that can drasticallyslash their production costs from today’s levels
have an enormous market waiting for them.
Japanese makers are expected to aggressively
tackle this challenge head on.

23

24

On its Web site, Tata Motors states that the Nano passes
all current safety and environmental standards.
30

Development Bank of Japan Research Report/ No. 61

According to “Robert Bosch India at a Glance,” Robert
Bosch India Limited.

Figure 24. Nano, A Low-Cost Car from India’s Tata Motors

Photo taken by the author

Figure 25. Prototype Mini-Car from Bajaj Auto, an Indian Motorcycle Firm

Photo taken by the author

Development Bank of Japan Research Report/ No. 61

31

Figure 26. Japanese Automakers’ Conceptual Strategy for Low-Cost Cars in India

Produce low-cost cars while maintaining
quality, safety, and brand image

Comply with global-standard levelsof environmental regulations
Inexpensive compacts + fuel-efficientgreen carsInnovation needed to produce cheaply

Only bare minimum offeatures

Huge reductions in partsprocurement costs

Expect technical ability fromJapanese suppliersCompetition/
collaboration

Highly reliable monozukuri technology
Make use of Western
suppliers and local suppliers
who already have their feeton the ground• Expand sales volumes by diversifying customer base to survive in an environment of razor-thinprofit margins• Substantially cut costs by changing materials, reducing amounts of materials used, and improving
production processes• Further reduce costs by actively using local manufacturers for casting and forging• Lower risks by cooperating or forming partnerships with Western or local parts manufacturers• Construct internationally diversified frameworks for developing embedded software for in-car
electronic systems to make use of local inexpensive and well-trained IT engineers

Imperative to the development of innovative, low-cost cars is the concept of bringing
together the wisdom of Japanese and Indian businesses and dividing operations based oneach other’s areas of expertise.
Source:32

Prepared by the Development Bank of Japan.

Development Bank of Japan Research Report/ No. 61

Conclusion
Recognizing the swift advancement of auto electronics, all parties in the auto industry are currently scrambling to construct ties with the electronic device and component industry but, unlike
the computer and digital home electronics field,
are doing so without a clear demarcation between competition and collaboration. It goes
without saying that electronic device and component manufacturers should pour as many resources as they can into satisfying their clients’quality and price demands. But to apply Japan’s
world leading consumer-electronics technologies
to automotive uses, automakers, in recognition of
their leadership position, have to step forwardand define the competitive from thenon-competitive and build cross-industry partnerships in non-competitive areas.
In the West, collaborations between industry,administration, and academia are already actively
moving ahead with development of next-generation
automotive technologies. In Europe, seven firms —Audi, BMW, Daimler, Bosch, Continental AG, andthe semiconductor firms Elmos and Infineon —with assistance from the German Ministry of

Education and Research, will be investing morethan 500 million euros in a joint project for car
electronics technology R&D starting in 2008.25
The project places emphasis on developing
technologies not only for safety aspects, such as
driver-assistance systems, but also for environmental aspects, such as improving engine efficiencies and curbing exhaust emissions. In the
United States, university-launched venture enterprises are active in R&D. One of these, A123
Systems — which is involved in joint development of lithium-ion batteries with General Motors — was established with assistance from the
U.S. Department of Energy and is pursuing development after amassing about 130 million dollars in seed money from funds and othersources.26
Referencing these examples, Japan needs tostrengthen ties between industry, administration,
and academia in the area of next-generation car
development as well as harness its world-classmono-zukuri [perfection of manufacturing]
technology, in collaboration with the electronic
device and component industry, and work to takethe world lead in standardizing electronic control
platforms.

25

See the Forschungsinstitut für Kraftfahrwesen undFahrzeugmotoren Stuttgart (FKFS) Web site,
http://www.fkfs.de/no_cache/unternehmen/news-presse/presse-detail/article/37/1/f57022402d/. According to the FKFS,
electrical and electronic technologies account for 30 percentof the added value in midsized cars and contribute as muchas 90 percent to automotive innovation.
26
Wall Street Journal, January 11, 2008 edition.
Development Bank of Japan Research Report/ No. 61

33

References
Denso Technical Review, Vol. 10, No. 2 (2005).
Institute of Electrical Engineers of Japan, “Jidosha
Dengen no 42V-ka Gijutsu (42V Technology for
Automotive Power Systems),” Study Committee
on 42V Power Systems, eds., (2003), Ohmsha.
Nikkei BP, “Car Electronics no Subete (All about Car
Electronics),” Nikkei Automotive Technology(2005).
Seiichi Shin, “Zukai Car Electronics Saizensen (FrontLine of Schematic Car Electronics),” (2006)
Kogyo Chosakai Publishing.
Toyota Technical Report, Vol. 49, No. 2 (1999).

Development Bank of Japan Research Report/ No. 61

35

List of Back Numbers (Including JDB Research Report)
No. 61 Forging New Corporate Alliances between the Auto Industry and the Electronic Device and Component
Industry: Opportunities and Challenges for the Electronic Device and Component Industry in Automotive Electronics (this issue)
No. 60 Survey on Planned Capital Spending for Fiscal Years 2006, 2007 and 2008 (Conducted in June 2007),
September 2007
No. 59 Do M&A Improve Corporate Financial Performance in Japan? March 2007
No. 58 Survey on Planned Capital Spending for Fiscal Years 2005, 2006 and 2007 (Conducted in June 2006),
September 2006
No. 57 Policies to Restore the International Competitiveness of Japanese Semiconductor Industry,
August 2006
No. 56 Survey on Planned Capital Spending for Fiscal Years 2005 and 2006 (Conducted in November 2005),
January 2006
No. 55 Survey on Planned Capital Spending for Fiscal Years 2004, 2005 and 2006 (Conducted in June 2005),
September 2005
No. 54 Improving Corporate Value through Disaster Management: Prospects of Socially Responsible Investment (SRI) for Disaster Reduction, July 2005
No. 53 Japan's Innovative Capacity and Policies for Commercializing New Technologies: Using Carve-Outs toCreate New Industries, May 2005
No. 52 Intelligent Transport System (ITS): Current State and Future Prospects, May 2005
No. 51 Recent Trends in the Japanese Economy: Pause in Recovery, March 2005
No. 50 Corporate Capital Spending Behavior and Innovation Efforts: Findings of Survey on Capital Spending
Behavior (Conducted in November 2004), March 2005
No. 49 Survey on Planned Capital Spending for Fiscal Years 2004 and 2005 (Conducted in November 2004),
January 2005
No. 48 Recent Trends in the Japanese Economy: Medium-term Outlook of Japanese Industrial Structure, January 2005
No. 47 Survey on Planned Capital Spending for Fiscal Years 2003, 2004 and 2005 (Conducted in June 2004),
September 2004
No. 46 Recent Trends in the Japanese Economy: Impact of Rising International Commodity Prices on Corporate Input/Output Behavior, September 2004
No. 45 How Life Cycle Assessment (LCA) Can Enhance the Fight against Global Warming, August 2004
No. 44 Recent Trends in the Japanese Economy: A Medium-term Scenario for the Japanese Economy with
Special Focus on the Flow of Funds and Finance, March 2004
No. 43 Survey on Planned Capital Spending for Fiscal Years 2002, 2003 and 2004 (Conducted in August2003), November 2003
No. 42 Promoting Corporate Measures to Combat Global Warming: An Analysis of Innovative Activities in the
Field, September 2003
No. 41 Prospects and Challenges for End-of-Life Vehicle Recycling, May 2003
No. 40 Survey on Planned Capital Spending for Fiscal Years 2002 and 2003 (Conducted in February 2003),
May 2003

No. 39 China’s Economic Development and the Role of Foreign-Funded Enterprises, May 2003
No. 38 Decline in Productivity in Japan and Disparities Between Firms in the 1990s: An Empirical Approach
Based on Data Envelopment Analysis, April 2003
No. 37 Trends in Socially Responsible Investment: Corporate Social Responsibility in a New Phase, March
2003
No. 36 Recent Trends in the Japanese Economy: A Medium-term Scenario for the Sustainability of the Japanese Economy, February 2003
No. 35 Concerns for the Future and Generational Consumption Behavior, February 2003
No. 34 Prospects and Challenges Surrounding Japan’s Electrical Equipment Industry: General Electrical
Equipment Manufacturers’ Restructuring of Operations and Future Prospects, November 2002
No. 33 Survey on Planned Capital Spending for Fiscal Years 2001, 2002 and 2003 (Conducted in August 2002),
November 2002
No. 32 Behavior Trends of Japanese Banks toward the Corporate Sector and Their Impact on the Economy,
October 2002
No. 31 Microstructure of Investment and Employment Dynamics: Stylized Facts of Factor Adjustment Basedon Listed Company Data, October 2002
No. 30 Recent Trends in the Japanese Economy: Globalization and the Japanese Economy, August 2002
No. 29 Corporate Financing Trends in Recent Years: Fund Shortages and Repayment Burden, August 2002
No. 28 Urban Renewal and Resource Recycling: For the Creation of a Resource Recycling Society, July 2002
No. 27 Labor’s Share and the Adjustment of Wages and Employment, June 2002
No. 26 Survey on Planned Capital Spending for Fiscal Years 2001 and 2002 (Conducted in February 2002),
May 2002
No. 25 Environmental Information Policy and Utilization of Information Technology: Toward a Shift in Environmental Policy Paradigm, March 2002
No. 24 The Changing Structure of Trade in Japan and Its Impact: With the Focus on Trade in Information
Technology (IT) Goods, March 2002
No. 23 Microstructure of persistent ROA decline in the Japanese corporate sector: Inter-company disparities
and investment strategies, March 2002
No. 22 Recent Trends in the Japanese Economy: The Japanese Economy under Deflation and Prospects ofEvolution, February 2002
No. 21 Survey on Planned Capital Spending for Fiscal Years 2000, 2001 and 2002, December 2001
No. 20 Current Situation and Challenges for Cable Television in the Broadband Era, October 2001
No. 19 Recent Trends in the Japanese Economy: The Japanese Economy under Deflation, August 2001
No. 18 Introduction of a Home Appliance Recycling System: Effects & Prospects: Progress towards Utilisationof Recycling Infrastructure, June 2001
No. 17 Survey on Planned Capital Spending for Fiscal Years 2000 and 2001, June 2001
No. 16 Revitalization of Middle-aged and Elderly Workers in Japan’s Labor Markets: Requiring the Expansionof the Vocational Training Functions, March 2001
No. 15 Risk-Averting Portfolio Trends of Japanese Households, March 2001
No. 14 Consumption Demand Trends and the Structure of Supply: Focus on Retail Industry Supply Behavior,
March 2001

No. 13 Recent Trends in the Japanese Economy: Weakness of Current Economic Recovery and Its Background,
March 2001
No. 12 Empirical Reassessment of Japanese Corporate Investment Behavior: Features and Changes since the1980s, based on Micro-level Panel Data, March 2001
No. 11 Survey on Planned Capital Spending for Fiscal Years 1999, 2000 and 2001, October 2000
No. 10 Job Creation and Job Destruction in Japan, 1978-1998: An Empirical Analysis Based on EnterpriseData, September 2000
No. 9

Recent Trends in the Japanese Economy: Information Technology and the Economy, September 2000

No. 8

Trend of International Reorganization Affecting the Japanese Automobile and Auto Parts Industries,
June 2000

No. 7

Survey on Planned Capital Spending for Fiscal Years 1999 and 2000, June 2000

No. 6

Current Status and Future Perspective of the Japanese Remediation Industry: Technology and Market
for Underground Remediation, May 2000

No. 5

Recent Trends in the Japanese Economy: The 1990s in Retrospect, March 2000

No. 4

Destabilized Consumption and the Post-bubble Consumer Environment, February 2000

No. 3

The Slump in Plant and Equipment Investment in the 1990s: Focusing on Lowered Expectations, theDebt Burden and Other Structural Factors, January 2000

No. 2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000, November 1999

No. 1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other AsianCountries, November 1999

JDB Research Report
No. 96 Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August 1999
No. 95 Efforts to Protect the Natural Environment in the United States and Germany: Environmental Mitigation and Biotope Conservation, July 1999
No. 94 Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999
No. 93 Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO sector
through comparison with Germany, June 1999
No. 92 The Impact of Demographic Changes on Consumption and Savings, March 1999
No. 91 Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March 1999
No. 90 Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999
No. 89 Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between Japan and the U.S., December 1998
No. 88 Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998
No. 87 Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998
No. 86 Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998
No. 85 Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998
No. 84 R&D Stock and Trade Structure in Japan, August 1998
No. 83 Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998
No. 82 The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public Acceptanceis Essential, May 1998
No. 81 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997 and1998 Conducted in August 1997, March 1998
No. 80 Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998
No. 79 Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January 1998
No. 78 Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series and Environmental Cost, January 1998
No. 77 Current Conditions and Issues of Computerization in the Health Care Industry: For the Construction of
a Health Care Information Network, January 1998
No. 76 Household Consumption and Saving in Japan, December 1997
No. 75 The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to Support
Diverse Consumer Choices, November 1997
No. 74 Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on International
Trade, October 1997
No. 73 The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on the Effects on Productivity and Employment, October 1997
No. 72 An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997
No. 71 Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of Economic Recovery, August 1997
No. 70 Corporate Fundraising: An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm Data
from Japan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March 1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulation of theElectric Power Industry in Japan and Implication of Experiences in the United States, December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key, October 1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of the Current Economic Recovery, September 1996
No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the UnitedStates and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and 1996
Conducted in February 1996, May 1996

No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995 and1996 Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October 1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October 1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part 2, July 1995
No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery Industry, June 1995
No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and 1995
Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March 1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private Level,
May 1994
No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994 and1995 Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and 1994
Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration, December
1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993 and1994 Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and 1993
Conducted in March 1993, April 1993
No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992 and1993 Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992
No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and 1992
Conducted in February 1992, April 1992

No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s, February
1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991 and1992 Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and 1991
Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990 and1991 Conducted in August 1990, September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment andTechnology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and 1990
Conducted in February 1990, March 1990
No. 18 Petrochemicals in Japan, The US, and Korea an Assessment of Economic Efficiency, February 1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989 and1990 Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly Industrializing
Economies, August 1989
No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years 1988
and 1989 Conducted in February 1989, March 1989
No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988 and1989 Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and ASEANCountries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987