Japanese Automotive Tier1s' Advanced Technologies and Products Research Report, 2024-2025

Japanese Tier1s’ advanced technologies research: accelerate external cooperation, intensify internal collaboration, and further upgrade “fine manufacturing”

In vehicle electrification and intelligence, Chinese OEMs and solution suppliers are leading the trend, especially at a time when intelligent application speeds up. Japan’s automotive industry and parts suppliers are however quickening their pace to catch up with their Chinese, European and American counterparts. While making continuous efforts to reinforce their technical superiority in some electrification segments, they are also still investing more in intelligence, involving AI development, software-defined vehicles (SDV) and chips. On the basis of stabilizing global sales growth, they also work to expedite connection with China’s intelligent vehicle industry.

In May 2024, the Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) of Japan announced a strategic plan for digital transformation of the Japanese automotive industry in the next decade, highlighting software-defined vehicles (SDV), robotaxi, and vehicle data value. Wherein, the development of SDVs is considered a top priority. The Japanese government predicts that the scale of the global SDV market will reach 41 million vehicles in 2030, and hopes that Japanese OEM can take a 30% share, or 11 million to 12 million vehicles. It can be seen that the goal is ambitious.

1. Japanese automotive Tier1s rev up external cooperation, and consolidate their superiority in electrification segments, sparing no effort to embrace intelligence

To develop artificial intelligence electric vehicles (AIEV), in addition to internal R&D and innovations, for example, support for AI development, automotive SoC, and operating system (OS), Tier1s need external cooperation as a matter of course.

In AI development, Japanese companies including TURING, TIER IV, Sakana AI, Digital Realty, NTT, Denso and Alps Alpine are working hard on development of AI technology, world models, LLM memory management technology, and more, in a bid to accelerate integration into automotive products and enable mass adoption of L4 autonomous driving in Japan. Examples include:

In November 2024, Denso and Quadric announced that they would work together to develop an NPU (neural processing unit), a semiconductor specialized for the arithmetic processing of AI. Through the agreement, DENSO will acquire the IP core license for Quadric’s Chimera GPNPU, and the two companies will co-develop high-performance automotive semiconductors on this basis.

Alps Alpine + Qualcomm: In January 2025, the two parties announced their expanded technology collaboration to integrate Qualcomm Technologies’ latest generation Snapdragon® Cockpit platform into Alps Alpine’s automotive products.

TIER IV, a supplier of open source software for autonomous driving, and the Matsuo Institute embarked on a generative AI project for Autonomy 2.0, aiming to significantly expand the operational design domains (ODDs) of Level 4 autonomous driving.

In chip R&D, Japanese manufacturers are vigorously advancing cooperation with giants like TSMC, Nvidia, Intel, and Microsoft.

• TSMC: its first Japanese wafer fab is scheduled to start mass production by the end of 2024, and the second fab will come into operation in 2027;
• Microsoft: In November 2024, Microsoft opened its first research base in Japan in Tokyo;
• Intel: In September 2024, Intel planned to partner with AIST to establish a new research and development center focused on advanced chip production;
• NVIDIA: In April 2024, AIST and NVIDIA teamed up to build a quantum computing system.

In addition, the METI plans to provide a total of 2 trillion yen (about 13 billion US dollars) in subsidies to boost investment in the domestic chip industry. Japan’s eight major chip vendors, including Sony Group, Mitsubishi Electric, Rohm, Toshiba, Kioxia Holdings, Renesas Electronics, Rapidus, and Fuji Electric, have planned to invest about 5 trillion yen (equivalent to 31 billion US dollars) by 2029 to increase the production capacity of power devices and image sensors, and increase investment in power semiconductors, sensors and logic chips. These technologies are considered the key to growth areas such as artificial intelligence, decarbonization and electric vehicles. Among them, Mitsubishi Electric, Rohm, Toshiba, Kioxia, and Renesas have taken a significant market share in SiC MOSFET, IGBT, automotive storage, high-end automotive MCU and other fields.

Not only that, the Japan Advanced SoC Research for Automotive, an alliance established at the end of 2023, is also committed to the research and development of 'chiplet' technology to enable SoCs to be integrated into production vehicles. The members include Japanese OEMs like Toyota, Nissan, Honda, Mazda and Subaru, and automotive electronic system components suppliers such as Denso and Panasonic, as well as automotive chip vendor Renesas Electronics, design tool software provider Synopsys, chip developer MIRISE Technologies (a joint venture between Toyota and Denso), and chip designer Socionext.

In electrification, Japanese companies have technological advantages in some segments and keep improving competitive edges of products (see table below), such as motors and power semiconductors (IGBT/SiC/GaN).

As concerns motors, Japan has multiple superior suppliers like Fukuta Electric & Machinery (flat wire hairpin motor), JFE Precision (cold forged hollow shaft, e-Axle motor hollow shaft), Tokai Rika (5th generation hub motor), Toshiba (TB9084FTG, a MOSFET gate driver IC for motors), THK (variable flux in-wheel motor), ELEMEC (XPEAC internal direct cooling motor), Nitto (hairpin stator winding, EESM rotor winding), and Nidec (motor). Take automotive Tier1 Nidec as an example to see its external supply cases.

As for intelligence, in the case of intelligent cockpits, Honda now has ASIMO OS (debuted at CES 2025), its core vehicle operating system which will be gradually installed in Honda 0 series models including Honda 0 SUV and Honda 0 SALOON production cars. Moreover, Toyota’s operating system 'Arene OS' is scheduled to be launched in 2026. In terms of cockpit innovation, Japanese Tier 1 suppliers provide a variety of new in-cabin technologies and products, including in-cabin integration, integration of HMI and interiors, vehicle assistant HMI, cockpit design, new input/output devices, occupant monitoring, multi-screen interaction, new interior lighting and sound field presentation, and interior electronic rearview mirror technologies. Major players include Toyota Boshoku, AGC, TOPPAN, TORAY, Nippon Seiki, TOKAI RIKA, Yazaki Corporation, Toyoda Gosei, Ichikoh Industries, Kyocera, Murata Manufacturing, ROHM, KAGA FEI, Oshino Lamps, Asahi Kasei, and Stanley Electric.

2. Japanese Tier1s work together and collaborate to help Japanese OEMs with rapider global development

In May 2024, the Ministry of Economy, Trade and Industry announced implementation of stricter regulatory measures in five key industrial sectors, namely, semiconductors, advanced electronic components, batteries, machine tools and industrial robots, and aircraft components, to curb the risk of technology leakage. Japan requires that these technologies should be 'developed locally”, and the most advanced factories also should “remain at home”, and even sales and exports will be regulated.

The Japanese machine tool order data (final value) for November 2024, released by the Japan Machine Tool Builders’ Association (JMA) on December 25, 2024, show that the total value of machine tool orders in November was 119.327 billion yen, an increase of 3.0% compared with the same period of the previous year, sustaining growth for two consecutive months. By region, the value of orders from the Chinese market jumped by 33.0% from the prior-year period to 29.319 billion yen, achieving eight consecutive months of growth. Especially in the automotive industry, the value of orders surged by 56.3% to 11.6 billion yen. This is mainly thanks to China’s domestic competitiveness enhancement measures around electric vehicles and aggressive investments in overseas factories. The great investment willingness in the Chinese market has become an important source of income for Japanese machine tool manufacturers.

Examples of fine manufacturing process include:

DMG MORI: it has developed a solution based on a five-axis machining center. This solution enables a mode of 'one machine, multiple functions' from gear roughing to precision grinding. This system covers the entire process from workpiece turning, milling, and gear roughing (e.g., gear shaping) to final precision grinding, even deburring. At the grinding stage, the grinding modules will be automatically loaded onto the spindle and ground precisely one by one by detecting the gear phase. The system is suitable for internal/external gear machining, with the machining accuracy up to ISO 4.

Nachi-Fujikoshi: it has launched 'GSGT260', a gear grinder that enables high-precision and high-efficiency grinding. It is mainly suitable for production of external gears, with the machining accuracy up to Grade 1 of the new JIS. Through form grinding on multiple tooth surfaces at the same time, this equipment is particularly fit to meet the needs of mass-producing reducers for electric vehicle drive modules (e-Axle).

The close internal and external supply relationships of Japanese auto parts Tier1s, and the innovative upgrades in manufacturing process are helping Japanese companies to go steady and far in the global market.