Japan Gears Up to Become Major Participant in Aircraft Industry
As Japanese industry struggles to adapt to the strengthening yen, Toshifumi Hirai, an official at Japan’s Ministry of International Trade and Industry, has his eyes set on the 21st Century.
The economics of the strong yen will probably force Japan’s currently most profitable industries--textiles, electronics, automobiles--to manufacture offshore in developing countries, said Hirai, director of the Aircraft and Ordnance Division at MITI.
“We need to find new, promising, profitable high-tech industries. . . . I think aircraft, or space, has a market in the next century.”
But worldwide competition in the aircraft industry is akin to a “marathon race” in which Japan is too weak and too far behind to even dream of taking the lead, Hirai added.
“We have to keep running to see the backs of the front runners,” he said. “We have no intention and no capability to pass them. But we just want to keep running the same distance or less distance behind.”
Despite such modesty, Japan’s efforts to develop an aircraft industry are taken very seriously by leading U.S. firms. MITI, after all, is famous for its success at nurturing industries, including steel and televisions, which later grew to devastate their American rivals.
U.S. firms, instead of seeing Japan as a threat, perceive the developments as part of the growing globalization of high technology industries and are aggressively seeking to become partners with Japanese aerospace firms--even supplying technical support.
George David, president of United Technologies Corp., the Hartford, Conn.-based maker of Pratt & Whitney aircraft engines, acknowledged during a visit to Tokyo that his firm’s cooperation with Japanese companies was contributing to their technical abilities in aerospace. But he said he wasn’t worried about helping to create future competitors.
“I believe they will be competitors anyway,” he said. “I would much rather partner with the strongest possible competitors rather than have to meet all of them head-to-head in the marketplace.”
Klaus Brauer, Boeing’s chief analyst for marketing and communications, noted that aircraft design and manufacture is “an industry with very high risks.” Japanese firms essentially have two choices, he said: They can “throw all their eggs in one basket” by picking a narrow niche to focus on as full-fledged competitors, or they can continue their current efforts to diversify and share risk with foreign partners.
So far, he said, the Japanese have chosen the less-risky path of partnership. “That makes perfect sense to us,” he said. “We see that continuing.”
U.S. occupation forces dismantled Japan’s aircraft industry after World War II. The industry has staged a comeback in recent decades to record sales of $8.7 billion last year, according to the Society of Japanese Aerospace Companies.
About 75% of the industry’s output is military work for Japan’s Self-Defense Forces, such as production of F-15 fighter jets under U.S. licenses. Much of the commercial work consists of producing parts for the Boeing’s 767 and 777 jetliners, and for Pratt & Whitney engines for those planes.
The goal is to change the ratio to about 50-50 military and commercial, said Shinya Kobayakawa, senior managing director of the Japan Aircraft Development Corp. (JADC), an umbrella organization for Japan’s five key aircraft firms: Mitsubishi Heavy Industries Ltd., Kawasaki Heavy Industries Ltd., Fuji Heavy Industries Ltd., ShinMaywa Industries Ltd. and Japan Aircraft Manufacturing Co. Ltd.
A key piece of the JADC strategy is for its firms to take the leading role in the design and manufacture of a new small passenger jet the Japanese have dubbed the YSX. JADC has for several years explored building such a plane with an American or European partner, either in the 100-seat or 75-seat class.
The YSX, if built, is likely to be a multinational effort. One possible scenario is for JADC, Boeing and Chinese state-run aircraft manufacturers to cooperatively build a 100-seat airplane. Boeing, for its part, has also been interested for several years in building a jet of this size. Boeing and JADC have launched a joint feasibility study for such an airplane, but design work remains in the early stage.
The Japanese believe the YSX could satisfy a global market for passenger jets smaller than those of the Boeing 737 series, which seats 108 to 159 passengers. Estimates of expected demand over the next two decades for this kind of smaller jet range from 1,500 to 3,000 aircraft.
The Japanese industry sees the YSX as a step toward participation in even bigger multinational projects, possibly including a post-Concorde supersonic transport or a new 600-passenger jumbo jet.
Japanese aircraft manufacturers have built only one model of commercial airplane during the postwar period: the 60-seat YS11, a turboprop airplane made largely from imported parts. The YS11 was a technological success but failed commercially. Production was discontinued in 1972 after only 180 of the airplanes were sold. The Japanese conceive of the YSX as a larger and much more sophisticated successor to the YS11.
Japanese manufacturers gained design and technical skills as a result of their participation in the development of the Boeing 777, which is just now coming into production. Their share in the 777 is valued at 21%, in terms of work performed, risk taken and profit to be shared. The five JADC firms also had a 17% participation in the Boeing 767.
Engineers from the JADC firms, which are primarily making large sections of the 777 fuselage, worked together with Boeing engineers in designing those sections.
“The quality of the parts that are produced for our airplanes by Japanese firms is very, very good,” said Brauer, the Boeing analyst. “The Japanese firms are very highly regarded as partners here.”
Mitsubishi Heavy and Kawasaki Heavy are partners with United Technologies in the production of Pratt & Whitney engines for Boeing aircraft sold to Japanese airlines.
Ishikawajima-Harima Heavy Industries (IHI) makes Pratt & Whitney F100 military engines under license for use in F-15J jet fighters, which are made by Mitsubishi Heavy for Japan’s Air Self-Defense Force.
“I think the idea of controlling the means of production in one nation, and controlling the technology in one nation, is actually bound to be a thing of the past in the 21st Century,” David explained.
“We need to prepare ourselves for the 21st Century economy, where there is a globalization of resources, a globalization of technology development, a globalization of the means of production.”
Such a trend is reflected in international maneuvering aimed at forming alliances to build a 100-seat passenger jet.
While Japanese firms and Boeing are conducting preliminary studies, Boeing has also discussed a small plane program with Taiwan and China.
South Korea and China, meanwhile, have held their own talks about cooperating with a European firm to produce a small jet.
“The reason the Japanese aerospace industry is interested in the YSX is because we want to take the initiative in the program,” Mitsubishi’s Hineno said. “But China and South Korea have the same idea. Probably China wants to lead the project, and South Korea is thinking the same way. It is impossible for every company in the world to work together on it. Probably there will be several groups in the future, and they will compete against each other.”
The Japanese think they can build the small plane, but don’t believe they have the design and sales skills to make it a commercial success.
Japanese capabilities, however, are rapidly expanding, and the industry’s dreams are ambitious. MITI is providing nearly $40 million a year in annual subsidies for research into engine systems and materials for a supersonic or still-faster “hypersonic” aircraft of the future, Hirai said.
A new supersonic transport may become reality, most likely under U.S. leadership, early in the 21st Century, Hirai said. When it does, Japan wants to be a player.
“National security, profitability, national pride, the good effect on other industries, technology spinoffs to other fields--all these things are included,” he explained. “It is like the Olympic games.”
