Minebea Faces Pricing Pressure, Despite Market Share and Matsushita Venture
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Sep 23,2003
Minebea Group Ltd. (Japan) indicated it may miss sales, export level and profitability targets this year, partially due to strong downward pressure on its product pricing worldwide. Consumers now expect and demand ever-lower prices for electronics, squeezing basic component manufacturers such as Minebea.
Via its NMB brand, Minebea is the world's largest manufacturer of miniature and precision instrument bearings. In bearings and other products, it employs 45,000 people in 39 manufacturing facilities across 10 countries. Minebea commands a 65% world market share of ball bearings under 22mm bore. In precision rod end and spherical bearings, it has a 60% world market share. In the United States, Minebea's holdings include New Hampshire Ball Bearings. Particularly important for the current period, Minebea dominates the computer disk drive market for fluid dynamic bearing motors and pivot bearings.
Despite Minebea's dominant market position supplying several key rotating electronic components, it has not been able to completely resist downward pricing pressure. Passed on from consumers to end manufacturers to component vendors, the forced price deflation is impacting Minebea's operations worldwide, to the point where it now expects total sales value to decline this year, even as the volume rises.
For manufacturers, this trend is a troubling reversal. Although manufacturing generally benefits from higher volumes through better leveraged cost structures, efficiency, lower per-unit overhead and other factors, Minebea's fast-rising volumes have still not been enough to counteract the extreme downward pressure on component prices.
But the company says it knows what it has gotten into. "Unit prices have always been coming down," said Tosei Takenaka, Minebea's Regional Director for Asia, even as he cites customers suddenly demanding unannounced 5% discounts across the board. The solution, he said, is to continue investing in manufacturing technologies and pursue joint ventures which strengthen its position globally.
And like many other manufacturers in today's economy, Minebea does not intend to add more employees as sales increase. Instead, it is employing systems to improve efficiency and spending on increased automation.
To that end, Minebea has been investing aggressively, particularly in Thailand, where seven locations, 37 divisions and 30,000 employees produce 60% of the company's output. Over 90% of Thai output, or baht 40 billion (USD $986 million) is exported, primarily to Japan.
In the fiscal year through March 2003, Minebea invested baht 4.5 billion ($111 million) in its various Thai operations. In 2002, the company invested baht 3 billion ($74 million) in Thailand. In all, Minebea has invested over baht 65 billion ($1.6 billion) during its 20 years operating in Thailand.
"Diversification is needed in Minebea's plants in Thailand and Shanghai. The facilities in Thailand will be much more sophisticated, while the ones in China will be focused on labor-intensive processes," said Mr. Takenaka. Unlike many other manufacturers, however, he said he did not expect that Minebea's China production would ever outstrip Thai production.
Further leveraging its electronic component manufacturing operations, Minebea recently announced a key joint venture with Matsushita to produce small, high-precision, electric stepping and permanent magnet motors. It is Minebea's first joint venture.
The new venture, currently in the due diligence phase, will be 60% owned by Minebea and 40% by Matsushita. It is expected to be active by second quarter 2004.
Mr. Takenaka said, "Through the joint venture, we will be the number one or number two in market share in some of the motor products." Total sales of the joint venture operations are expected to top baht 30 billion ($740 million) in 2004.
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1.The news above mentioned with detailed source are from internet.We are trying our best to assure they are accurate ,timely and safe so as to let bearing users and sellers read more related info.However, it doesn't mean we agree with any point of view referred in above contents and we are not responsible for the authenticity. If you want to publish the news,please note the source and you will be legally responsible for the news published.
2.All news edited and translated by us are specially noted the source"CBCC".
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