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Japan's Aerospace Industry

Part 3. Structure of Japanese Aerospace Industry

The Japanese aerospace industry is currently quite small in comparison to other Japanese industries and in comparison to the aerospace industries in other countries. Based on 1995 figures, Japan's aerospace industry exports are only a fraction of those of other industries: general machinery (1/100), automobiles (1/50), steel (1/17), and shipbuilding (1/10) (Nihon Kôkû Uchû Kôgyôkai 1997, 63). However, in 1996 Japanese aerospace exports increased almost 90% to ¥180 billion ($1.5 billion) (Nikkan Kôgyô Shimbun 1997), primarily due to participation of Japanese companies in international collaboration projects and to favorable economic conditions throughout the worldwide aerospace industry. Japan's aerospace industry sales (including both commercial and military sales but not space-equipment and related sales) in 1996 of ¥890 billion ($7.4 billion) were about 1/18 of the U.S.'s aerospace sales and less than 1/2 of the aerospace sales in England, France, and Germany (Nihon Kôkû Uchû Kôgyôkai 1996, 5).

Japan's aerospace industry depends on military demand for 75% of its sales in comparison to the U.S., France, Germany, England, and Italy, where military demand accounts for only 45% to 57% of total industry sales (Nihon Kôkû Uchû Kôgyôkai 1997, 284). However, in 1996 the industry's orders from Japan's Defense Agency went down for the third straight year (Nikkan Kôgyô Shimbun 1997). The Senior Managing Director of the Japan Aircraft Development Corporation (JADC) stated that Japan's goal is to change the military/commercial ratio of aerospace sales to about 50-50 (Holley 1994).

The Japanese aerospace industry is dominated by four companies who account for 69% of the industry's total 1996 sales (including space-equipment and related sales) of ¥1,120 billion ($9.3 billion). The table below shows statistics for these four companies (Nihon Kôkû Uchû Kôgyôkai 1996, 3, 200, 216, 295, 313):
 

Company
1996 Aerospace Sales
(in billions)
% of Total
Industry Sales
Mitsubishi Heavy Industries (MHI) ¥394 $3.3 35%
Kawasaki Heavy Industries (KHI) ¥195 $1.6 17%
Ishikawajima-Harima Heavy Industries (IHI) ¥136 $1.1 12%
Fuji Heavy Industries (FHI) ¥55 $0.5 5%

The top firms in the Japanese aerospace industry listed above are virtually the same enterprises that dominated the industry before World War II (Samuels 1994, 259), which provides evidence of the high barriers to entry into the industry. These four companies depend on aerospace for only about 15% of their total revenues (Nakamoto 1997). They all provide a wide range of aerospace products, but they have certain specialties.

IHI concentrates on engine production, but MHI and KHI are also involved in the production of engine components. IHI accounts for approximately 70% of Japan's total annual engine and engine components production (Ishikawajima-Harima 1995). Since 1959 IHI has won every prime engine contract from the Japanese military (Samuels 1994, 208), and IHI is the lead company for international engine collaboration projects.

MHI, KHI, and FHI concentrate on the manufacture of airframes and related components. KHI and MHI also have significant involvement in helicopter development and production. MHI has a leading role in the development and production of H-II and H-IIA rockets. In late 1996, an agreement was signed to use these domestically-produced rockets to launch ten U.S. commercial satellites over a five-year period from the year 2000 (Masuko 1997, 92). This was the first time a Japanese-produced rocket will be used to launch a foreign commercial satellite.
 

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