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Japanese semicon industry plummets

Posted: 13 Apr 2016     Print Version  Bookmark and Share

Keywords:semicon industry  japan semicon  IoT  mcu 

4. How Japanese chip industry has crumbled

Culprit 1: Top management

Many industry observers we talked to agreed on one thing. Top management at Japanese semiconductor manufacturers deserve the majority of blame for Japan's downfall.

IC Insight's Matas said, "Japanese business leadership that takes the long-term view couldn't deal successfully with rapidly changing global market needs and dynamics. The "hot" item in today's consumer market is tomorrow's old news. It's partly culture-based, but Japanese semiconductor companies have been too slow to adjust."

Top 10 semi sales leaders

Figure 4: Top 10 Worldwide Semiconductor Sales Leaders ($B). (Source: IC Insights)

IHS analyst Minamikawa said, "The top executives at Japanese firms stuck to the idea that as long as their companies have superior technologies, they wouldn't lose." They turned a blind eye to factors other than technologies that would make the chip business successful.

Culprit 2: R&D that results in no commercial success

Yunogami observed that every national project and consortium built around the development of semiconductors in Japan over the last two decades has failed. Instead of helping, they made Japanese chip companies "gravely ill," he said. "In some cases they literally killed a few Japanese chip vendors."

Japan has never stopped investing in R&D. "Japan loves R&D," he said. But, as things have turned out, every prescription developed by the Japanese government was either dead wrong, or out of step with the global market reality. Making matters worse, Japan's top managers failed to lay out the steps it must take to restore their companies' profitability, Yunogami added.

Another culprit is a lack of cost-consciousness among Japanese chip suppliers, pointed out Minamikawa. Reliability and quality are important. But equally important is to know what's good enough, and cheaper for certain applications.

Culprit 3: SoC designers who wait for customers' instructions

There is a fundamental structural issue in the Japanese semiconductor industry. Chip vendors in Japan took great pride in designing SoCs, but those designers have been often too dependent on customers (or the system division of their parent companies) to design a system, and develop architecture for SoCs, Yunogami explained. In fact, Renesas relies on Toyota and Denso to develop much of the value-added portions of its SoC designs. Renesas is just their chip supplier.

Too many Japanese SoC designers are accustomed to twiddling their thumbs until their customers bring in designs, Yunogami concluded. "Japan lacks initiative."

Because Japanese SoC companies depended heavily on Japanese system manufacturers, the SoC vendors lost steam in tandem with Japanese consumer electronics manufacturers, Minamikawa said.

Matas agreed. "Japan's once strong, vertically integrated business model fell apart and missed out on smartphone growth, perhaps the greatest opportunity since the PC market." Likewise, Japanese SoC vendors, missed out on its golden opportunities.

Culprit 4: Lack of resources

And then, there's the recession. "Japan's economy has been in or flirted with recession essentially since the late 90s," Matas observed. While worldwide GDP growth has averaged 2.8% since 1980, Japan languished at less than 0.5% since 2008. Substantial capital investment was critical to the growth of its semiconductor industry, but Japanese chip vendors never found the necessary resources.

Other oft-cited factors include, well, competition. "Japan was beaten by South Korea and then Taiwan at its own game, the manufacturing efficiency of commodity parts. Also, Japan did not foresee or take advantage of the growing foundry model (even IDM foundry) until too late," IC Insights Matas pointed out.


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