Hello, this is Kenji from Tokyo.
Since Donald Trump began his second term as US president in January, most of us who have lived in this part of the world will be in the habit of checking in the morning what he said, wrote, or did while Asia was sleeping. This may have already led some of us to develop some kind of immunity to shock his words and actions.
However, the US’s shocking attack on three nuclear sites in Iran on Sunday morning certainly came as a rude awakening for many.
The ceasefire was declared by Trump and later confirmed by Iran and Israel, but it only underscored the need to enhance security, including economics, as it was called the “12-day war.”
Reflecting the growing urgency among politicians, bureaucrats, academics and business leaders, many forums and symposiums have recently been held here to discuss economic security.
One of these was hosted by the University of Tokyo on June 20th along with RAND experts. The Forum focused on securing a critical mineral supply chain under the premise of a trilateral alliance with American nonprofit Institute Senior Engineer and Senior Policy Analysis Engineer and US Fabian Villalobos.
He said he was often asked, “What is the most important mineral?” But for him, it is “the wrong question to ask.” Because if a part of the supply chain is missing, the entire system will be malfunctioning.
We recently saw this in the automotive industry. There, American and Japanese manufacturers were forced to stop production lines when the Chinese curbs on rare earth exports began.
On the other hand, potential bottlenecks of different properties can emerge from completely different sources. The fact that key technical components and materials are controlled by a small number of lesser known companies in Japan.
Drone fuel
According to a report by Nikkei’s Ithuro Fujino, Chinese regulations requiring double-use goods export licenses have more than tripled the price of drone components shipped to the US.
An analysis of Chinese customs data shows that the overall export volume of infrared devices, an important drone portion that allows viewing in the dark, fell by about 30% between September and April last year, and export value rose by nearly 50%. During this period, the price per unit has doubled, primarily strengthening the balance of supply and demand. Exports to the US, their biggest destination, saw a drop of about 60% in volume, while jumping 3.5 times in unit prices.
“Today, China acquires 90% of the US market for commercial drones,” the statement comes from a 2024 report from the then Marco Rubio office on China’s manufacturing sector. Rubio certainly knows that Beijing can use drones as an effective leverage in trade negotiations.
Required thread
Nitto Boseki, or Nittobo, may not be a name, despite its history dating back more than a century. However, because its products are so important to the AI supply chain, executives from Nvidia, AMD and Microsoft have come to Japan to pay for their visits.
A collaboration between Lauly Li, Theng Ting-Fang from Japan Asia, Taipei and Ryohtaroh Satoh’s Cheng Ting-Fang explains that this relatively unknown AI-Enabler is currently the only company in the world that can provide the best glass fabrics and is a key company for creating the best AI AI servers.
Japan has several examples of seemingly obscure materials manufacturers supporting the global high-tech supply chain. However, Nitobo has a particularly interesting history. It was one of the “top ten cotton spinners” in Japan before World War II, and helped lead the country’s economic restructuring after the war. Competing with other Asian economies pushed the entire industry to the corner, making Nitobo one of the most successful examples of companies moving away from the sunset industry, but many of their peers have died. The name Boseki, which means spinning cotton, reminds us of the history of its adaptation.
Low altitude, noble ambition
China is betting on civilian drone troops to promote new sources of growth, writes William Langley of the Financial Times.
According to analytics providers’ drone industry insights, the country controls commercial drone production, accounting for 70-80% of the global supply.
By the end of last year there was a roughly $2.2 million drone registered with China’s Civil Aviation Authority, and was deployed to do everything from crowd control to fire fighting.
But Beijing’s ambitions are far ahead. CAAC hopes that the market size of the low-altitude economy, which refers to aerial activity below 1,000 meters above the ground, will grow five times by 2035.
That means finding new uses of technology from private companies. The logistics and food delivery sector is early adopters, with Meituan and his rivals already employing unmanned aircraft on several routes.
The country’s farms are also large users. According to figures from Guanyan Tianxia Data Center for 2022, agriculture and forestry use about a third of industrial drones.
However, some people in the highly competitive UAV industry say it is difficult to exchange purchasing power of large governments and military buyers, but strict export controls limit the scope of overseas.
Double talk
Executives from two European high-tech companies recently sat with Nikkei Asia to discuss their respective strategies.
Marc Biron, CEO of Belgian chipmaker Melexis, explained how his company is leveraging the production capacity of “neutral” Malaysia to navigate geopolitical headwinds.
Speaking to Norman Go of Kuala Lumpur, Biron said his company’s facility in Kooching, Sarawak, is shipping chips to both the US and China as “deliberate hedges” against the attachment of global trade fragmentation.
Biron relies on Malaysian neutrality, which he likened to Switzerland. “Its neutrality allows it to be manufactured for Asia, China and the US from a single location.”
Meanwhile, Cheng Ting-Fang spoke with Jos Benschop, Vice President of Technology at ASML, about the development of the next generation, cutting-edge lithography machines that will advance enough to meet the needs of the chip industry since 2035 and beyond.
The world’s largest semiconductor device manufacturer has partnered with Carl Zeiss for this visionary development push.
Suggested Reading
How Red Tape Amplified the Confusion of Rare Earth in China (Nicki Asia)
Taiwan has raised the Cold War ante over chips (FT)
SoftBank Chief Pitch $1tn AI and Arizona Robot Complex (FT)
Alibaba combines travel units from “Instant Retail” Drive (Nikkei Asia)
Tap on the ride app for unused metros in India to seduce commuters (Nicki Asia)
Australian regulators call on YouTube to ban social media (FT) under the age of 16
Sri Lanka’s auto market is leaning towards BYD, other Chinese majors (Nicki Asia) and EVS
China’s cyber threat to Europe on par with Russia warns Czech President (FT)
Trade curbs in China send ethane price slides (Nichi-West Asia)
Chinese factories are rushing to reduce Donald Trump’s dependence on the US (FT)
