\u201cAs India\u2019s economic development gains greater global weight, its significance will grow not only as a market in itself but also as a supply base for the Middle East, Africa, and neighboring Asian countries,\u201d Teiichi Goto, CEO of Fujifilm Holdings, told Bloomberg in November<\/a>. In contrast to China, where downsizing and restructuring have become the reality for Japanese firms, India is increasingly being positioned as a destination for growth-oriented investment.<\/p>\n For decades, Japanese chemical companies invested in everything from commodity chemicals to specialties in China, making the country an engine of corporate growth. The China Plus One concept first emerged among Japanese manufacturers and supply\u2011chain experts in the mid\u20112000s, as concerns grew over dependence on China. The idea was to diversify risk by establishing a second strategic investment destination alongside China.<\/p>\n The concept gained further traction after the 2008 global financial crisis. By the 2010s, the term was widely used in the Japanese business media and occasionally appeared in government documents. But until recently, no country could rival China in terms of market size and business infrastructure. So Japanese foreign investment in Asia remained concentrated in China.<\/p>\n India emerges as an attractive investment destination<\/p>\n In recent years, though, India\u2019s growing economy and middle class \u201chas created the possibility that it could become the \u2018One\u2019 in China Plus One,\u201d says Mikiya Yamada, a stock analyst at Mizuho Securities. \u201cWith China\u2019s economic outlook increasingly uncertain, companies are not in a position to expand investment.\u201d<\/p>\n In 2022, the Japanese government announced<\/a> a five-year, \u00a55 trillion ($33 billion) public and private investment package for India. The objective was reached in just 3 years. Building on this momentum, Japan has set a new target of twice as much, or $66 billion in private-sector investment over the next decade.<\/p>\n The case for India is compelling. \u201cNew investment that once would have gone to China will be increasingly directed to India,\u201d notes Masashi Kono, Research and Analysis Department director at Jetro. \u201cIndia is gaining attention both as a risk hedge and as a high-growth market.\u201d<\/p>\n According to the International Monetary Fund<\/a>, India will surpass Japan this year to become the world’s fourth-largest economy. Chemical manufacturers are especially encouraged by the growth of the upper-middle-income class, which in India means annual income in the $15,000\u2013$35,000 range. This segment grew from 3.2% of the population in 2010 to 8.6% in 2020 and is projected to reach 29.0% of the population in 2030 and 41.9% in 2040, according to Jetro. By then, 70% of households will earn over $15,000. More-affluent customers usually buy products made with better-quality raw materials.<\/p>\n Firms target semiconductors and agrochemicals<\/p>\n An Indian policy to produce semiconductors domestically instead of relying on foreign supplies is another driver of Japanese investment. Although India accounts for 7% of global semiconductor demand, it relies almost entirely on imports, with more than half coming from China<\/a>. Seeing an opening, Japanese companies are considering local production of semiconductor-related materials. Feasibility studies are also underway for materials used in specialized semiconductors for solar power and automotive applications.<\/p>\n Sumitomo Chemical is skilled at making semiconductor chemicals, notably isopropyl alcohol, hydrogen peroxide, aqueous ammonia, and sulfuric acid, with technologies that reduce impurities to the parts-per-trillion level. It operates plants in Japan, South Korea, and China and opened a new facility in Baytown, Texas, last spring. The company also agreed in November to acquire Asia Union Electronic Chemical, which brings operations in Taiwan and the US.<\/p>\n “With the idea that the first mover captures the largest share, we aim to localize production.”<\/p>\n Yasuo Yoshino, general manager, Sumitomo Chemical\u2019s semiconductor materials and mobility business<\/p>\n
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