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Asia

Japan Government to Help Fund Subsea Cable Projects to Counter China

The Japanese government is to provide financial aid to Japanese submarine cable suppliers and investors to counter Chinese rivals.

The Ministry of Internal Affairs and Communications will shortly finalize an "overseas expansion action plan" that would include specific policies to support submarine cable projects, Yomiuri Shimbun reports.

New subsea cable systems would receive loans or investment funds channeled through the public-private Japan ICT Fund (JICT).

Recipients would include systems suppliers such as NEC as well as cable investors like NTT Communications and KDDI. The scheme would also include indemnities from the government-funded Nippon Export and Investment Insurance.

NEC is one of the world's big three subsea cable systems suppliers, along with France's Alcatel Submarine Networks (ASN) and US-based Subcom.

Between them the three hold around 90% of a sharply growing market. The business was worth $2.6 billion in 2016 and is expected to exceed $6 billion by 2023, according to ASN's sales and marketing chief, Paul Gabla.

The number four supplier is China-based optical firm Hengtong Optic-Electric, which has just acquired Huawei's subsea cable business. (See Hengtong Set to Shape the Global Subsea Market .)

Hengtong and other Chinese optical firms, like CICT, are coming off a period of over-supply after domestic demand suddenly nosedived in 2018.

They are being encouraged by industry leaders to turn their focus offshore. Gao Junshi, the director of the wireline division of the China Mobile Design Institute, says China's subsea system suppliers should focus on exports because of the small size of the domestic market.

Their offshore ambitions, as well as their ability to go very hard on price, are likely one reason for Japan's sudden interest in supporting its subsea cable sector.


For more fixed broadband market coverage and insights, check out our dedicated Broadband content channel here on Light Reading.


Another is the prospect of winning contracts for some of the planned new mega-cables to connect emerging markets, such as the massive 24,000km trans-Pacific system intended to link Asia and Latin America.

The Chilean government is expected to issue contract in mid-2020, and both NEC and Hengtong have expressed strong interest. Besides these issues, Japan's biggest concerns are strategic, according to Yomiuri Shimbun. It reportedly shares US government fears about China's expanding submarine cable networks and the security risks posed by Chinese vendors.

Even though the cable sector is not large, Japan's move to support its national champions is significant as it puts it into a direct bidding contest with China.

Chinese vendors, most notably Huawei, have received billions of dollars in state aid of various kinds, including large lines of state bank credit to help customers buy their products. (See No one wants to talk about Huawei's state subsidies.)

— Robert Clark, contributing editor, special to Light Reading

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