ICT Industry Trends Japan - 2022

Japan accounts for more than 7% of global electronics and computers production. The overall performance of the ICT sector remains good in 2022. Sales growth of hardware items and consumer electronics has slowed down somewhat, but this is compensated by robust demand for IT services and solid growth in the electronic components segment.

Production of electronic components is driven by high demand for chips, order backlogs and rising prices. That said, the semiconductor shortage continues to affect production of computers and telecommunication equipment, which are forecast to decrease year-on-year by 6.4% and 10.4% respectively. Growth in these subsectors should pick up again in 2023, and large investments are underway to expand semiconductor production capacities in the coming years. However, a protracted war in the Ukraine and a subsequent shortage of palladium and neon gas, both necessary raw materials for semiconductors production, remains a downside risk. For the time being, chipmakers still have sufficient inventories available, but a longer war could lead to bottlenecks towards the end of 2022.

We expect profit margins of Japanese ICT producers, wholesalers and retailers to remain stable in 2022, because they are able to pass on higher costs for semiconductors and increased expenses for energy and transport to end-consumers.

Payments take between 60 and 120 days on average, depending on the size and market power of individual businesses. Payment behavior in the ICT industry has been good during the past two years. The number of payment delays and insolvencies has been very low in 2021 and H1 of 2022, and we expect this benign credit risk environment to continue in the coming twelve months. Our underwriting stance is open across all ICT subsectors. We expect the Japanese ICT sector will continue to grow in the coming years, by about 3.5% annually until 2025, and remain a key provider of computers, smartphones, gaming items and consumer electronics.