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Japan's Aerospace Industry

Part 4. Japan's Strategy

The basis of Japan's current strategy in the world aerospace market can be traced back to 1986, when the Aircraft Industry Promotion Law was revised. Article One was changed from 'promotion of domestic development of aircraft and aeroengines and the subsequent reduction of the trade deficit' to 'promotion of joint international development of aircraft and aeroengines and the subsequent facilitation of international business exchange' (Samuels 1994, 253). Many leaders in government and industry still have the goal of indigenous production of aircraft and engines, but it would be pursued through long-term international collaboration.

Samuels sets forth three values that are the basis of Japan's technology and security ideology: autonomy (kokusanka), diffusion (hakyû), and nurturance (ikusei) (Garvin, Samuels, and Masterson 1994; Samuels 1994, 42-54). These three values form the foundation of Japan's strategic initiatives in commercial and military aerospace.

Autonomy or indigenization (kokusanka) refers to the ability of Japan to design and produce its own aircraft without dependence on foreign countries. Diffusion (hakyû) involves the adaptation, assimilation, and diffusion of technologies, often acquired from foreign countries, throughout the economy. The aerospace industry's demanding technologies can lead to technological advancement in other industries such as electronics, machinery, materials, shipbuilding, and automobiles (Nihon Kôkû Uchû Kôgyôkai 1997, 12-13). Nurturance (ikusei) describes the efforts by the Japanese government to simultaneously manage industry competition and to nurture technological advancement.

Japan's specific strategies in the aerospace industry are discussed in more detail in the following sections:

International Collaboration
During the past two decades Japanese firms have entered into several international collaborations that link them with foreign firms in the design, development, and production of advanced commercial aircraft and engines. Collaboration arrangements provide firms with strategic organizational flexibility to more readily access research technology, and international markets (Anderson 1995, 3). Prime aircraft and engine contractors enter into collaboration arrangements for several reasons, including the following: share financial and technical risk of costly, complex projects; obtain market access to certain foreign countries; secure critical engineering and manufacturing technologies and resources; and have dedicated suppliers who produce at high quality and low cost. Prime contractors enter into these collaboration agreements even though it leads to reduced short-term profits, less manufacturing volume, and shared technology with potential future competitors. Since indigenous aircraft and engine production is not currently economically feasible, Japanese aerospace firms have eagerly sought collaboration arrangements with foreign firms for the following reasons: learn design and large-scale systems integration skills; acquire where possible the latest and most advanced technologies; and obtain experience in marketing and product support. Section 5 of this essay provides details on specific international collaboration projects.
Licensed Production
Japan has used licensed production of U.S. components and systems for many years to obtain technology for defense and commercial aerospace projects. Licensed production of U.S. military aircraft sustained the growth of the Japanese aerospace industry from the 1960s to the 1980s. Japanese firms gained especially valuable experience and technologies during the licensed production of the technically-advanced F-15 fighter aircraft from the late 1970s to the early 1990s. In several areas of defense systems, most notably aircraft, Japan has pursued a strategy of moving from purchased U.S. systems to licensed production to indigenous development. Japanese industry has also diffused technology acquired through military aircraft programs to commercial applications. For example, IHI first produced long shafts for F100 fighter engine licensed production and now dominates the worldwide commercial market for this component (National Research Council 1995, 4-5).
Japanese aerospace firms have followed the strategy of focusing on strong niche technology areas to compete effectively in the global market. They are very strong competitors today in composites, other advanced materials, fuselage panels, flat panel displays, and sophisticated electronic components.

IHI exemplifies the Japanese strategy of specialization. IHI excels in long shafts, large disks, and lightweight composite materials that account for a growing share of many advanced aircraft engines. For example, the company pioneered the development of a carbon-fiber blade with special grooves designed to circulate air in a way that keeps engines from overheating. IHI participates in multiple collaboration arrangements with all three prime engine contractors to build a range of jet engines based on different technologies and designed for different markets. IHI's strategy ensures that it gets a portion of most large engine sales, even though the three prime contractors continually compete very intensely. IHI currently has about 5% of the world market for engines and related components, even though it does not produce any complete engines for the commercial market (Glain 1997; Garvin, Samuels, and Masterson 1994; Samuels 1994, 257-258).

Indigenous Aircraft and Engine Production
The stated objective of the Japanese aerospace industry is to achieve total functional capability in basic technology research, development, production, sales, and after-sales service support covering all areas including airframe, engine, parts, and materials (Nihon Kôkû Uchû Kôgyôkai 1997, 79). In other words, Japan wants to establish complete indigenous capabilities that will allow the country to compete at the top level of aerospace manufacturing.

This objective of complete indigenous capabilities does not mean that most industry and government leaders favor the development and production of their own aircraft with no assistance from foreign countries. Japan would need to overcome numerous daunting challenges: huge development costs; little experience in design, systems integration, marketing, and after-sales support; strong, entrenched competitors; and the need to develop a family of planes and engines (3 to 7) to effectively compete. Moreover, Japanese engine manufacturers currently do not have the capability to effectively produce a large commercial jet engine due to lack of design capability and experience, especially in certain leading-edge technologies (U.S. Department of Commerce 1993, 2, 7). Japan's only postwar indigenous commercial aircraft was the 60-seat propeller-driven YS-11, produced from the late 1950s to the early 1970s. Even though the aircraft was technically sound, it was a commercial failure, with less than 200 eventually being sold. The move of the industry to jet engines and the Japanese lack of marketing capability caused this market failure (Nakamoto 1997). Even though the YS-11 was a domestic design, it still relied on imported or coproduced engines, avionics, and other major subsystems (Samuels 1994, 236).

Although in the 1990s industry and government leaders had discussions about and the government provided financial support to investigate a Japanese-built YXX 150-seat plane and a YSX 50- to 100-seat plane, both of these potential projects now appear to be dead. Since the 1980s, Japan's primary strategy in the aerospace industry has continued to be participation in international collaborations.

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Introduction | Part 1 | Part 2 | Part 3
Part 4 | Part 5 | Part 6 and Bibliography
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