Technology leaked to China and South Korea due to the outflow of human resources…The reason for the decline of “Japanese semiconductors”

Ultra-high-performance Japanese semiconductors that were once called the "rice of industry." It is used in everything from automobiles and home appliances to weapons, gaining a 50% share of the world market, but now it is less than 10%. How did the "Hinomaru Semiconductor" decline? Journalist Akiyoshi Yamamura reports on the reasons for this and future prospects.

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"There is no prospect of a complete recovery yet. There are multiple reasons that the supply of parts from Vietnam cannot keep up with the new corona, but the shortage of semiconductors is also a cause."

The person in charge of Noritz, a major gas water heater manufacturer, screamed. The shortage of semiconductors in Japan, which began last autumn, continued into the middle of winter, with delays in the delivery of gas water heaters. As a result, there have been a series of heartrending stories on the Internet, such as, "In the middle of winter, the shower suddenly turned to water and I thought I was going to die."

This shortage of semiconductors is spreading not only to water heaters, but also to home appliances such as air conditioners, game consoles, and automobiles.

What is of particular concern is the automobile industry, which is a key industry in Japan.

Automotive companies cut production due to semiconductor shortages

At the financial results announcement in November of this year, the figures announced by each company as forecasts for production cuts in the fiscal year ending March next year were about 300,000 units for Toyota and about 300,000 units for Honda. About 800,000 units, Nissan about 600,000 units, Mazda about 200,000 units, and Suzuki about 641,000 units -- all automobile manufacturers have decided to cut production significantly.

As with the gas water heater, the cause of this is the same as the gas water heater, partly due to the delay in parts procurement from Southeast Asia, but there is no doubt that the protracted shortage of semiconductors has been greatly reflected.

In addition, the latest smartphones that we use every day have functions such as memory, image sensors, communication such as Wi-Fi and Bluetooth, touch panels and fingerprint authentication. A circuit line width semiconductor is built in. Furthermore, AI, aircraft, jet aircraft, rockets, artificial satellites, etc. are used not only for civil commercial purposes but also for military purposes.

In other words, today's semiconductors, like vaccines and masks, are "daily goods" that are indispensable in our daily lives, and at the same time, they are vital "strategic goods" that support the survival base of the world's military. ”.

If this strategic material is lost, fake news will start to spread.

"Second Oil Shock"

In fact, in the first half of this year, the rumor that "Ajinomoto was the cause of the shortage of semiconductors" was circulating on the Internet. According to him, "Ajinomoto Fine-Techno Co., Ltd. (AFT), a group company of Ajinomoto, was unable to keep up with the production of ABF, an insulating film used in semiconductor packages, which led to a shortage of semiconductors."

However, when I inquired with the Ajinomoto Public Relations Department, they said, "There is no product shortage, and it is not true." In other words, the semiconductor shortage this time had nothing to do with Ajinomoto's insulating film.

Nevertheless, the recent shortage of semiconductors in Japan is so serious that some say it is close to a second oil shock. But identifying the cause of the semiconductor shortage is not an easy task. This can be easily understood by looking at the complicated manufacturing process of semiconductors.

A semiconductor as an IC product is physically an "integrated circuit" (chip) that collects electronic circuits on a substrate.

On the other hand, functionally, it can be used for many purposes such as input/output, calculation, control, storage, amplification, and communication.

From the perspective of general semiconductor manufacturing processes, broadly speaking, after design, the "pre-process" of creating circuits on silicon wafers and the "post-process" of cutting out wafer chips, packaging and mounting ” consists of two processes.

What are the fundamental problems unique to Japan?

For example, there are at least about 400 to 600 processes in post-process work alone, and more than 1,000 if detailed work is included. There are about 1,500 to 2,000 semiconductor parts called materials and devices that are used in automobiles, for example. The types of semiconductors as a whole include "power semiconductors" that promote advanced functions such as control, and "power semiconductors" that convert light into electrical signals. There are tens of thousands of types, including "sensor semiconductors", "logic semiconductors" that perform arithmetic processing, and "analog semiconductors" used for power supply ICs.

It is difficult to investigate the "cause of the shortage of semiconductors" for each of these processes and types, but in reality there was a fundamental structural problem peculiar to Japan at the root.

Kazumi Nishikawa, Director of the Information Industry Division of the Ministry of Economy, Trade and Industry, who is in charge of semiconductor products, speaks.

"I think there are both institutional and practical reasons for this domestic shortage of semiconductors. In terms of power semiconductors and legacy semiconductors, “panic buying” is occurring due to shortages of semiconductors, etc. Currently, the shortage of semiconductors in the automotive field is not due to a shortage of semiconductors for final products, but rather to the gap between supply and demand as a whole. It's breathing fire."

In other words, there is no supply capacity to meet the demand for semiconductors in Japan.

This means that the domestic production capacity of semiconductors has declined due to the overseas expansion and factory closures of Japanese companies, and the production capacity has declined.

The trigger was the defeat of the United States

Japan was once the world's number one semiconductor producer. Until 1990, six or seven companies were always in the top 10 in the world, starting with memory semiconductors called "DRAM," and in 1988 their share of sales reached 50.3% of the world total.

The impetus for the decline of such a glorious era was the ``complete defeat to the United States in the friction between Japan and the United States in semiconductors'' in 1986.

It is unreasonable for Japanese companies to sell Korean Samsung Electronics semiconductor products because they accepted the request from the United States of "20% share of foreign semiconductors" due to the Japan-US semiconductor agreement, which was concluded without any policy by the Ministry of International Trade and Industry. The era continued for 10 years.

Moe Fukada, an IT business analyst, says:

"Since the Japan-US semiconductor agreement was signed, Japanese companies in trouble were immediately asked by Taiwan and South Korea to ``do you want to transfer technology to avoid tariffs?'' Taiwan and South Korea. However, they came in just as they were preparing for the Japan-U.S. Semiconductor Agreement, which is why Japanese companies can easily get on board with it.”

In the latter half of the 1990s, the world's top manufacturers such as NEC, Hitachi, Fujitsu, and Toshiba fell into the red in the semiconductor sector and fell from their positions. Currently, Kioxia (former Toshiba Memory) in 11th place is the highest, and on November 12th this year, the parent company Toshiba decided to divide the company into three. Kioxia itself has also been rumored to be acquired by Western Digital (WD) of the United States, and its share of sales in Japan is about 10%, one-fifth of what it used to be.

Leakage of information and human resources

Sony, which owns sensor semiconductors, is now like a burnt-out ruin after the war, with the exception of some semiconductor material and equipment manufacturers, says a manufacturer engineer. Japanese semiconductors have become so tragic as to be talked about.

Mr. Shigeru Fujii (currently CEO of SSC), ex-managing executive officer of Fujitsu, talks about the cause of its decline.

"Japanese semiconductors were the world's top technology until the 1970s and 1980s, and they have also created global standards. From the 2000s, it has been 20 years since I continued to say that I will manage. In particular, Japan is not good at dealing with customers who use semiconductors, and currently devices and manufacturing, as well as EDA (automatic design support tool) and IP (circuit development data) are not going well.In the end, Japan has become globalized. At times, I think it was largely because the head office was slow to make decisions and the organization and personnel were not fluid.”

What has become conspicuous since the mid-1990s is the outflow of semiconductor technology information and human resources. At the time, Japanese companies were being pursued by the startups South Korea's Samsung Electronics and SK Hynix, and Taiwan's TSMC.

I was headhunted by South Korea and China, where I was treated well...

Behind the scenes, Japanese engineers provided semiconductor technology information. At that time, manufacturers were in a structural recession, and their employment patterns and personnel systems changed. When the Japanese semiconductor industry was restructuring and wage cuts, Japanese engineers were headhunted overseas, one after another.

"In Korea's first-class company class, (the annual salary of Japanese engineers) is 30 million yen to 40 million yen. Most are 3-year contracts, and income tax is tax-free for 5 years. Among them, 1 40 million yen in the first year, 30 million yen in the second year, and no remuneration in the third year. There was also the risk of not knowing, but even so, Japanese engineers went abroad.” (Mr. Fujii)

On the other hand, the average annual income of Japanese engineers at that time was about 4.5 million yen in their 40s, with no special allowances, and on top of the nationwide uniform wage system as a manufacturing industry. This is no match.

A part-time job from Saturday, December

A former semiconductor engineer at a major manufacturer also admitted this.

“Since the mid-1990s, many Japanese engineers have traveled to South Korea and Taiwan every weekend to teach Japanese semiconductor technology as part-time jobs known as ``Tokiguki-Karai''. I was headhunted on the condition that a two-year contract presented by an executive would be renewed every year, with an annual salary of 30 million yen.At the time, the company had told me that my salary would be cut by 20%, so I took the plunge and quit the company. I only went to Seoul for two years, but compared to other countries, information management in Japan is not at all strict. I saw it with my own eyes."

As one of the recovery measures, the Japanese semiconductor industry launched "Hinomaru Semiconductor Co., Ltd." from the early 2000s.

There are two companies, Elpida Memory (hereafter Elpida), which was established in 1999, and Renesas Electronics (then Renesas Technology), which started in 2003.

In particular, Elpida was expected to carry the "Hinomaru Semiconductor", centered on Hitachi and NEC, with the addition of Mitsubishi Electric. However, the initial DRAM market share was sluggish at around 2%. In 2002, Yukio Sakamoto, who graduated from Nippon Sport Science University and worked for the Japanese subsidiary of Texas Instruments in the United States, was appointed as the new president of Elpida, and was in charge of Elpida's management for about 10 years.

The Japanese government gave up too early

However, after that, the strong yen, the Lehman shock, and the Great East Japan Earthquake led to a rapid deterioration in management. Elpida went bankrupt in 2012. In the end, Elpida was sold to Micron with a debt of 110 billion yen.

After that, Mr. Sakamoto himself became a consultant. He expanded into Taiwan and China, teamed up with a former executive of the semiconductor company Tsinghua Shiguang Group, which was subject to US economic sanctions, and established a subsidiary, IDT, in Kawasaki City two years ago. is closed.

Mr. Sakamoto, who says that the reason is "the impact of the new corona," looks back on those days.

"The semiconductor business of Japanese companies is just one business division, and even though I was the president of a semiconductor company, the head office controlled all the investment budgets and personnel expenses, and I was not actually the president. Even if we spin people out of companies, it won't go well.Even with the government subsidy of 30 billion yen to Elpida, I thought it would be impossible.After all, it was 300 billion yen at that time. TSMC is still expected to receive 400 billion yen from the government, so it was an order of magnitude higher.The Development Bank of Japan also provided 10 billion yen in loans and about 30 billion yen in investment, totaling 400 billion yen. It was 100 million yen, but I thought it would be useless if that was all I could get.”

Mr. Sakamoto, the top management of Elpida, is of course responsible for the bankruptcy.

Should we aim for number one again?

Former Secretary-General Akira Amari, who established the Liberal Democratic Party's Semiconductor Promotion League in May this year, said:

``The cause of the failure of Japanese semiconductors in the past is that when they moved from large computers to personal computers in the 80s, they didn't notice the change in the trend, including the ability to make CPUs, and cheap memory and CPUs were used. Even so, we were obsessed with high quality and fell behind.In addition, there were problems such as the old-fashioned self-sufficiency principle in Japan's unique manufacturing process, and the adverse effects of the vertically integrated system as a business structure."

About "Hinomaru semiconductor" which failed with the support of the country,

"If Japan falls into the self-sufficiency principle of its own system, it will be difficult for users to see through, and products with user specifications like Apple will not come out. Create a fabless company that emphasizes design more (value Japan should have been sensitive to the seeds and needs (with emphasis on users), but Japan has yet to secure a global share in the field of domestic semiconductor mother machines (equipment) and materials. Therefore, Japanese semiconductors should aim to become Japan as number 1 again through international cooperation now.”

Actually, Japanese semiconductors are easily affected by foreign exchange and international affairs, in addition to domestic "internal factors."

In 2019, the United States under the Trump administration started strict regulations and sanctions against Chinese semiconductor products, including Huawei, amid the US-China confrontation (decoupling) policy.

At the same time, for Taiwan's TSMC, we proceeded with the "Taiwan reconciliation work" to stop the procurement of advanced semiconductors that had been exported to China and invite the construction of a factory in the United States.

The battle over the “global standard”

By the way, TSMC has now grown into a global company that represents Taiwan, possessing both the world's best advanced logic semiconductor microtechnology and mass production capabilities.

Under the Biden Democratic administration, the U.S. Congress is currently budgeting for a bill called the "Chips Act," a bill to promote domestic production of semiconductors. The global keyword is “in-house production,” in other words, the domestic production of semiconductors.

On the other hand, China aims to expand the self-sufficiency rate of semiconductors to 70% or more with the “Made in China 2025” enacted in 2015.

“Now, with the advent of DX, the digital society, the world is divided into a liberal camp that utilizes digital information for human rights, privacy, and democracy, and a totalitarian camp that uses it for national system governance like China. The "global standard" is being fiercely contested.Amidst this, semiconductors perform a concrete task of performing advanced calculations and analyzing data, for example, the score that measures the creditworthiness of the other party in units of tenths of a second. The evolution of DX and the evolution of semiconductor development competition are two sides of the same coin.What we learned from the spread of the new coronavirus was that the lack of domestic manufacturing bases led to a shortage of supply chains. For Japanese semiconductors, it would be best if all processes, from upstream to downstream, from front-end to back-end, were handled domestically.” (Mr. Amari)

At this point, ``Hinomaru Semiconductor'' has become an ``information infrastructure'' that strengthens Japan through ``international cooperation,'' rather than the ``rice of industry'' as it used to be. And now, "global green policies and digital policies will change the game for the Japanese semiconductor industry, which has weakened in the last 30 years. There are expectations that opportunities will come to Japan again in the future with new technologies such as stacking and optoelectronic convergence devices." (Semiconductor analyst).

Win-win international cooperation

As a concrete move, TSMC received a subsidy of about 400 billion yen from the Japanese government in Japan, and jointly built the Kumamoto Factory with the Sony Group. Construction decided. In addition, plans are currently underway to conduct joint development with the University of Tokyo and the National Institute of Advanced Industrial Science and Technology (AIST).

When I asked AIST, Tetsuji Yasuda, director of the electronics and manufacturing area, replied:

"I think that the specific content of research and development is also a typical win-win relationship in international collaboration. For example, cutting-edge chip-on-wafer-on-substrate We are planning to implement the 3D three-layer structure packaging of the chip.TSMC is the world's top class in packaging technology for high-performance computing such as servers.In joint research with AIST, AIST is in charge of the development of new materials and new processes. ) TSMC will be in charge of the integration.Japanese companies do not have this cutting-edge integration technology.There is a great advantage in doing the integration part that Japan lacks together in Japan.”

Sophistication of technology

In other words, from now on, Japan will use "3DIC (three-dimensional integration)" instead of TSMC's "miniaturization technology" to vertically integrate semiconductor chips. It is said that it will open up a way out with the advancement of technology by superimposing "layering technology".

Even the Ministry of Economy, Trade and Industry on the brink.

"It doesn't matter if you say, ``The Ministry of International Trade and Industry and the Ministry of Economy, Trade and Industry were idiots.'' We are also reflecting on it, but in Japan, we had to convey to the people why semiconductors were necessary. Rather than protecting the semiconductor industry, semiconductors are extremely important for Japan to thrive in the face of digitalization, and we need a national consensus.”

However, there are still some deep-seated voices of concern that "technical information on semiconductor materials and equipment, which is Japan's specialty, will be leaked and will be swayed by overseas players again."

In any case, the current Japanese semiconductor has reached a situation where there is no need to wait.

Certainly for Japan, the creation of manufacturing bases and the development of new technologies are important in the national strategy for economic security. However, at the same time, the most important things are the information capabilities that can compete with overseas forces, the deepening of corporate consciousness that can treat excellent Japanese engineers, and the emergence of leaders who build a large social infrastructure like Eiichi Shibusawa of the Meiji Restoration. It's an important time.

Journalist Akiyoshi Yamamura. Born in Kumamoto Prefecture in 1960. After working for financial industry magazines, he became a journalist with a focus on politics, administration, and science. Recently, he has been writing on the theme of "manufacturing in Japan" including semiconductors. He has authored many books such as "Ministry of Finance personnel decides Japan" (Tokuma Shoten).

Published in the December 23, 2021 issue of "Weekly Shincho"