Japan's government is set to support domestic companies in procuring submarine cable installation vessels. The demand for submarine cables, which account for 99% of international communications, has surged due to the explosive growth in data traffic driven by the expansion of artificial intelligence (AI). However, Japanese companies currently lack sufficient vessels to meet this rising demand, and many of their existing vessels are aging. The emergence of Chinese companies in this sector has also raised concerns. The government aims to reduce reliance on foreign sources for both manufacturing and installation of cables, thereby enhancing the independence of its communication network.
According to the Nihon Keizai Shimbun (Nikkei), the Ministry of Internal Affairs and Communications is targeting a budget of 100 billion yen (approximately $872 million) for the fiscal year 2027 to support the procurement of submarine cable installation vessels. This amount is a target figure, and the actual support level will be finalized after budget discussions with the Ministry of Finance by the end of the year. This marks the first time the government will subsidize the cost of vessel procurement.
The ministry is considering subsidizing about half of the procurement costs, which exceed 40 billion yen per vessel. Due to the depreciation of the yen and rising material costs, procurement expenses are on the rise. The government plans to support the procurement of 3 to 5 vessels in the fiscal year 2027.
These vessels are essential not only for the installation of new submarine cables but also for the repair of damaged cables. Nikkei noted that a shortage of installation vessels could lead Japanese companies to miss out on increasing demand or result in a rise in cables not involving domestic firms, thereby undermining the independence of the communication network.
Geopolitical risks surrounding submarine cables are also increasing. Recently, there have been multiple incidents of cable disruptions around Taiwan and the Baltic Sea, with allegations of involvement from China or Russia. Natural disasters pose additional threats; during the 2011 Great East Japan Earthquake, submarine cables around Japan were severed. This context has led the Japanese government, which has previously supported the local installation of data centers and submarine cables through funds, to decide to subsidize vessel procurement.
In the global submarine cable manufacturing market, France's Alcatel Submarine Networks leads with about 40% market share, followed by U.S.-based SubCom with 30% and Japan's NEC with 20%. China's Huawei Marine Networks (HMN Technologies) holds less than 10% market share. NEC, the third-largest player, has a technological edge but lacks its own installation vessels. In practice, installation is often handled by Japanese telecom companies NTT and KDDI, with some relying on foreign vessels. Recently, Chinese companies have gained prominence, and major U.S. tech firms like Google and Meta have begun installing their own submarine cables.
The Japanese government is also diversifying the locations where submarine cables connect to land-based networks, known as landing stations. Currently, these stations are concentrated in Chiba Prefecture's Minamiboso City and Mie Prefecture's Shima City, which are close to Tokyo and Osaka, where communication demand is high. While this concentration is advantageous for reducing data transmission delays, it poses a significant risk of simultaneous communication disruptions in the event of disasters or intentional cuts. Last year, the government selected SoftBank as the operator for the expansion of landing stations in Tomakomai City, Hokkaido, and Itoshima City, Fukuoka Prefecture.
Information and communication is one of the 17 strategic areas prioritized by the Takai administration. The government has set a policy to invest a total of 2.4 trillion yen in submarine cables, combining public and private funding, by the fiscal year 2040. It aims to increase the market share of Japanese companies in the global submarine cable market to 35% by 2030, a 15 percentage point increase from the current level. The plan encompasses everything from cable manufacturing to securing installation vessels and diversifying landing stations, with the goal of enhancing the competitiveness and independence of submarine communication networks, a critical infrastructure in the AI era.
* This article has been translated by AI.
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