The output of the ship machinery and equipment industry in Japan in 2000 was closely related to the newbuilding volume at Japanese shipyards and to shipbuilding Prices. The total output of the Japanese ship machinery industry fell significantly to \722.2 billion in 2000, representing a 3.4% decrease from 1999.

　In a breakdown of this total by product category, marine internal combustion engines (diesel engines and spark ignition engines, etc.) held the greatest share of 36.7%, followed by parts and accessories (diesel engine parts, accessories, etc.) constituting 22.1% of the total outfits (valves, pipe joints, life-saving and fire-fighting equipment, etc.), 13.4%, marine auxiliaries (generators, pumps, etc.), 9.1%, navigational equipment(radars, telecommunications equipment, etc.), 6.7%, mooring and cargo handling machinery, 5.9%, and shaftings and propellers, 4.3%.

　Exports of ship machinery and equipment in 2000 increased over the previous year and totalled \194.7 billion(up 9.2% over the 1999 total). The proportion of exports to the total output value was 27.0%.

　In a breakdown of exports by product category, marine internal combustion engines accounted for 60.9% of the total; navigational equipment, 13.3%; parts and accessories, 12.1%; and marine auxiliaries, 6.9%. Classified by geographical destination, 35.5% of the total exports went to North America, 34.6% to Asian countries, and 20.4% to Europe.

　On the other hand, ship machinery imports by Japanese shipbuilders totalled \25.3 billion (up 19.3% over the 1999 total). The shares of individual product categories were 40.0% for outfits, 17.6% for marine internal combustion engines, and 17.1% for marine auxiliaries.

　

　The Japanese ship machinery industry consists of 741 factories, and about 33,000 workers are engaged in the industry (as of December 31, 1999), which produces a wide variety of ship machinery and equipment including diesel engines, generators, outfits and navigational instruments, and steadily supplies these products to shipowners and shipyards.

　However, the foundation of Japan's ship machinery industry has weakened as a consequence of a decrease in capital investments and stagnation of R&D activities reflecting the protracted recession, in addition to intensified international competition and low profitability due to decreased product prices.

　In order for Japanese ship machinery manufacturers to remain viable under such adverse circumstances and to continue their steady supply of high-quality machinery and equipment to users worldwide, they have to promote technological development capabilities to adapt themselves to changes in the market and to consolidate their financial bases that would make such development possible.

　Japanese ship machinery manufacturers should depart from the traditional pattern of their developmental activities merely intended to improve upon and upgrade licensed foreign technologies, but try to develop technologies based more on their own creativity and original ideas. The manufacturers also have to aim at establishing their own technology adaptable to changes in the conditions of seafaring labour, advancement of information technology, further sophistication of peripheral technologies focusing on materials, electronics, and control techniques among others. The lack of investment in R&D and engineering has proven to be a serious cause of concern, and this has highlighted the need to develop an environment, which could serve to revitalize R&D activities.

　

　The Japanese ship machinery industry has to improve its cost competitiveness, and this means that individual manufacturers would be required to work out intrinsically lower-cost designs and to advance the standardization of their products aimed at reducing the number of components used, using more common components and reducing the man-hours spent per unit produced in addition to productivity enhancement by automation and modernization of production facilities and procurement of lower-cost materials.

　For ship machinery manufacturing to remain a viable industry in this adverse environment, individual manufacturers essentially need solid enough financial bases to enable them to invest in necessary facilities. They are faced with the challenge to meet this need by expanding the scale of investment they can afford by augmenting their capital structures through alliances and re- alignment and arrangements for the joint procurement of components and materials.

　Ship machinery and equipment are manufactured usually to individual orders on a low-volume high-mix basis, entailing a high-cost structure and retarding the automation of production lines.

　On the other hand, the shipping industry requires even greater reliability and easier maintenance of ship machinery and equipment and steady availability of their spare parts in connection with changes in the forms of fleet management and operations, reflecting the increasing number of flagged-out ships and the exasperating shortage of skilled crew members.

　In order to successfully meet these requirements, it is essential for Japanese ship machinery manufacturers to achieve substantial progress in the modularization and standardization of their products.

　

　The use of advanced information technology, as typically witnessed in electronic commerce, is now becoming increasingly prevalent in industry and society as a whole. In shipbuilding and other industries related to ship machinery manufacturing, the rationalization of business procedures and transaction practices is expected to rapidly progress through computerized data handling and network building, and accordingly it has become indispensable for the ship machinery industry as well to pursue an extensive introduction of IT-adapted business operations.

　

　Highly IT-oriented ship machinery manufacturing is expected to become a generally more vitalized industry as it will bring about productivity enhancement and accelerated new product development through the achievement of greater efficiency in the development, designing and manufacturing divisions and more prompt decision-making.

　Advanced IT is also expected to facilitate the rationalization of business procedures in the entire ship machinery industry, as it will necessitate, along with the standardization of information processing procedures, a review of the current flow of business procedures and restructuring of the internal organizations of companies.

　The three-year developmental phase of the ZoHaku Web project (R&D activities for a more sophisticated design and technical data exchange network) was started in fiscal 1998 to promote the standardization of technical information exchange procedures between shipbuilders and ship machinery manufacturers. The ZoHaku Web developed under this project is already in the stage of practical application, and has been in service since April 2001.