Japanese electronic component manufacturers have started to adjust a strategy that for years seemed logical: abandoning lower-margin products to focus on advanced and more profitable components. The issue is that the space left in the lower and middle segments has allowed competitors from China and Taiwan to gain scale, industrial experience, and global market share.
According to data cited by Nikkei Asia and reported by Taiwan News, Japan’s share of global electronic component production has decreased from 43% in 2006 to 32% in 2025. This figure doesn’t mean Japan has become irrelevant. Murata, TDK, Taiyo Yuden, Nidec, Nippon Chemi-Con, and other companies remain essential names in passive components, capacitors, inductors, sensors, motors, and high-reliability parts. However, this shift indicates a loss of volume share that is beginning to concern the Japanese industry.
The change in response is particularly noticeable. Murata Manufacturing, a leading global producer of multilayer ceramic capacitors, appears to be strengthening its presence in low-cost products even at the expense of narrower margins. Nippon Chemi-Con would follow a similar approach in consumer-grade and more common ranges. The goal isn’t to maximize short-term profitability but to prevent Chinese and Taiwanese rivals from continuing to grow from the bottom to target higher-value products.
The Lesson of Basic Components
In technology, low-margin products are often seen as a burden. They require high volumes, manufacturing efficiency, cost control, and constant commercial pressure. For years, many Japanese companies opted to focus on advanced ranges where they could command higher prices thanks to quality, reliability, certifications, and close relationships with industrial and automotive clients.
That strategy worked for a while. Japan maintained a strong position in components for automotive, industrial, telecommunications, servers, medical equipment, and high-reliability electronics. But by retreating from certain more common ranges, it left a gap. Chinese and Taiwanese firms took over those segments, gained scale, improved processes, and gradually moved into more complex categories.
The case of MLCCs (Multilayer Ceramic Capacitors) is one of the best examples. These ceramic multilayer capacitors are present in virtually all electronic devices: smartphones, electric vehicles, servers, motherboards, power supplies, routers, industrial equipment, and data centers. They may seem small and inexpensive, but without them, modern electronics can’t function.
Demand has surged with artificial intelligence, electric vehicles, and industrial electrification. An AI server or accelerator board requires a large quantity of passive components to filter, stabilize, and manage energy in high-consumption environments. More advanced models demand smaller, more reliable capacitors with better thermal performance. Japan and South Korea maintain an advantage here. However, in more standardized ranges, China and Taiwan have advanced rapidly.
| Indicator | Industry Read |
|---|---|
| Japan’s market share in components 2006 | 43% of global production |
| Japan’s market share in 2025 | 32% of global production |
| Main expanding competitors | China and Taiwan |
| Previous Japanese strategy | Prioritize higher-margin products |
| Current response | Defend volume in more common ranges |
| Key segment | MLCC and other passive components |
| Demand drivers | AI, servers, electric vehicles, industrial electronics |
Murata Prefers Sacrificing Margin Over Ceding Scale
Murata’s decision has a defensive but also strategic interpretation. If a company completely abandons the lower-cost ranges, it not only loses sales but also loses contact with customers, production capacity, process learning, material purchasing power, and presence in high-volume supply chains.
This point is crucial because basic components can serve as an entry point to more advanced products. A manufacturer starting with less complex capacitors can use that foundation to improve quality control, automation, costs, and customer understanding. Over time, they can scale up to more sophisticated products. This is precisely what Japan wants to prevent happening without resistance.
That’s why Murata’s new strategy should not be viewed merely as a price war. It’s a way to protect the entire industrial architecture. Maintaining market share in more common products helps sustain factories, suppliers, materials, production equipment, and business relationships. Although margins per unit are smaller, high volumes can serve as a defense against competitors seeking to build industrial muscle.
Nippon Chemi-Con is moving in a similar direction. The company, specialized in capacitors, has indicated in its reports that markets such as data centers, communications, automotive, and industrial equipment will continue to drive component demand. If Japanese manufacturers don’t want to remain confined to premium niches, they need to stay present in higher-volume categories.
The clear message for investors is that focus shouldn’t only be on the price of finished MLCCs. If manufacturers decide to compete for share, profits may shift toward those supplying equipment, materials, ceramic powders, electrodes, furnaces, inspection systems, stacking, cutting, metallization, and testing machines. Capacity expansion requires a broad industrial supply chain.
China and Taiwan Take Different Paths Forward
Chinese progress hinges on a combination of domestic market, industrial policy, and manufacturing scale. Beijing has been working for years to bolster its tech supply chains, especially since tensions with the US revealed external dependence on semiconductors and components. While China still faces limitations in some high-reliability ranges, its ability to produce volume and improve quality pressures traditional leaders.
Taiwan, on the other hand, benefits from a unique position in contract electronics manufacturing, semiconductors, motherboards, servers, and advanced assembly. Its companies don’t always compete directly with Japanese firms in the same segments, but they profit from proximity to major electronics clients and new demand centers linked to AI.
Japan’s declining market share results from multiple factors: product portfolio shifts, price pressures, rival expansion, China’s manufacturing strength, Taiwan’s role in the tech supply chain, and evolving global demand. Also influencing this is Japan’s own strategic choice over years to prioritize profitability at the high end.
Ironically, AI is reinforcing the value of many components once seen as unglamorous. Public conversations focus on GPUs, HBM memory, lithography equipment, or data centers, but behind every server are thousands of passive parts without which systems can’t operate reliably. AI infrastructure needs not only cutting-edge chips but a foundation of reliable, available components produced at scale.
A Less Visible War Than Chips
The battle for electronic components may be less media-prominent than the advanced semiconductor race, but it could have equally important consequences. If Japan resumes competing in basic ranges, sector margins could tighten. If China and Taiwan continue to gain share, Japanese manufacturers might become more focused on high-reliability niches. And if AI demand sustains capacity pressures, equipment and materials for MLCC and other passive components could become growth areas.
For Japanese companies, the choice is difficult. Defending share often means accepting lower margins in some lines. Not doing so allows more aggressive competitors to build scale and later attack more profitable products. Murata seems to have chosen the first path: sacrificing some margin to preserve industrial territory.
This also offers a valuable lesson for Europe. Technological supply chains don’t collapse overnight; they erode when a region abandons segments deemed unattractive, only to discover years later that those segments are essential for maintaining manufacturing capacity, suppliers, and knowledge. Industrial sovereignty isn’t only about premium products; it also requires volume.
Japan retains technology, brands, quality, and expertise. But China and Taiwan have shown that scale can become a form of power. Murata and Nippon Chemi-Con’s reactions indicate Japanese manufacturers understand the risk. The next battle won’t only be about who makes the most advanced capacitor but about who controls enough capacity to supply electronics powering AI, EVs, and data centers.
Frequently Asked Questions
What’s happening with Japanese component manufacturers?
They’ve lost global share to Chinese and Taiwanese competitors. According to Nikkei Asia, their share dropped from 43% in 2006 to 32% in 2025.
Why does Murata want to sell more low-cost products?
To prevent Chinese and Taiwanese rivals from gaining more scale in common ranges and later competing more strongly in higher-value products.
What are MLCCs?
These are multilayer ceramic capacitors used in almost every electronic device. They help stabilize and filter energy in motherboards, servers, vehicles, smartphones, and industrial equipment.
Why is AI increasing demand for passive components?
AI servers, accelerators, power supplies, and networking systems require many components to manage energy, signals, and stability under high consumption.