The Japanese government will provide financial assistance to suppliers and investors of Japanese submarine cables to counter Chinese rivals.

The Ministry of the Interior and Communications will soon finalize an “action plan for overseas expansion” which would include specific policies to support submarine cable projects, Yomiuri Shimbun reports.

The new submarine cable systems would benefit from loans or investment funds channeled through the public-private Japan ICT Fund (JICT).

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

NEC is one of the three main global suppliers of submarine cable systems, with the French Alcatel Submarine Networks (ASN) and the American Subcom.

Between them, they hold around 90% of a rapidly growing market. The company was worth $ 2.6 billion in 2016 and is expected to exceed $ 6 billion by 2023, according to ASN’s sales and marketing director, Paul Gabla.

The fourth supplier is Chinese optical company Hengtong Optic-Electric, which has just acquired Huawei’s submarine cable business. (See Hengtong ready to shape the global submarine market.)

Hengtong and other Chinese optical companies, like the CICT, are emerging from a period of excess supply after the sudden drop in domestic demand in 2018.

They are encouraged by industry leaders to focus on overseas. Gao Junshi, director of the wired division of China Mobile Design Institute, said Chinese submarine system suppliers should focus on exports due to the small size of the domestic market.

Their offshore ambitions, as well as their ability to push prices very hard, are probably one of the reasons for Japan’s sudden interest in supporting its submarine cable sector.

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

The Chilean government is expected to issue a contract in mid-2020, and NEC and Hengtong have expressed keen interest. Besides these issues, Japan’s biggest concerns are strategic, according to Yomiuri Shimbun. He would have shared The US government fears the expansion of China’s submarine cable networks and the security risks posed by Chinese suppliers.

Even though the cable sector is not important, Japan’s decision to support its domestic champions is important because it places it in a direct bidding competition with China.

Chinese suppliers, notably Huawei, have received billions of dollars in state aid of all kinds, including major state bank lines of credit to help customers purchase their products. (See No one wants to talk about Huawei’s government subsidies.)

?? Robert Clark, Associate Editor, Special for Light Reading