Market Overview

Driven by the Chinese government's Buy China initiatives, domestic manufacturers are expanding their footprint across a broad range of functional film markets. Because final product assembly, such as for televisions and smartphones, is heavily concentrated in China, the primary end users of these films and auxiliary supplies are Chinese set makers.

Since these manufacturers dictate material adoption, ongoing localization driven by the Buy China policy is making a relative decline in Japanese market share virtually inevitable. While South Korean suppliers still retain a presence in certain covered product categories, many have already been absorbed into the local supply chain through acquisitions by Chinese firms.

This shift mirrors trends from the early 2010s, when Chinese manufacturers first entered the LCD backlight component market. Initially, this transition was limited to lower-complexity products, such as light diffusion films for PC monitors, while brightness enhancement films and materials for premium televisions remained out of reach.

However, market dynamics have since evolved. As the technological capabilities of Chinese film producers advanced—and local users mastered the application of domestic materials—demand pivoted overwhelmingly toward made-in-China alternatives. A strikingly similar transition is now beginning to unfold in market segments that have long been core to the business of Japanese film manufacturers.

Noteworthy Topics

Buy China Targets High Demand Markets

Backed by Buy China policy, domestic Chinese manufacturers are rising in established, high-volume film markets, posing a threat to Japanese makers' market share. Such markets include MLCC release films, polarizer protective films, polyimide films used for graphite sheets, and BG and DC tapes used in semiconductor wafer and chip manufacturing processes. Meanwhile, although technical requirements in these existing markets continue to advance, opportunities for broader application and customer base expansion remain limited. Consequently, while maintaining their traditional competitive edge through high-quality differentiation, Japanese film manufacturers are actively expanding into untapped frontiers, such as aerospace and advanced semiconductor applications.

Future Outlook

As Chinese manufacturers aggressively gain ground in established markets, Japanese film makers are proactively pivoting their strategies toward new, untapped sectors such as aerospace, semiconductors, and hydrogen-related applications.

In July 2026, Japan’s cabinet approved 17 Strategic Domains*, many of which are still pre-market. Because material and component specifications for these fields remain fluid, a unique window of opportunity has opened for Japanese manufacturers. Rather than relying on vague customer pain points to drive development from scratch, they can take the initiative by offering technology-driven innovations rooted in proprietary film-forming and materials expertise—effectively leading with technology seeds rather than waiting for expressed market needs. To succeed, film makers must collaborate closely with converters to translate ambiguous customer requests into commercially viable demands.

*Source: Cabinet Secretariat, “Japan's Growth Strategy” (July 2026) -in Japanese（https://www.cas.go.jp/jp/seisaku/nipponseichosenryaku/index.html#2026_2_head）
-Outline in English
(https://www.cas.go.jp/jp/seisaku/nipponseichosenryaku/pdf/jgs2026en.pdf)

Research Outline