Taking advantage of the United States to contain China, Japanese semiconductors want to make a comeback

Image caption 1: Canon's chip manufacturing equipment. (Canon official website)

Image caption 2: TSMC's semiconductor factory in Kumamoto, Japan. (Visual China)

Our special correspondent Chen Yan and Song Yi

Will the Japanese semiconductor industry, which was suppressed in competition with the United States thirty years ago and plummeted, take advantage of the current US containment of China's semiconductor industry and make a comeback? In the 1980s, Japanese made semiconductors once held about 50% of the global market share, but now their share is less than 10%. The United States is making every effort to gather allies to suppress China's semiconductor industry, and Japan sees this as a good opportunity to return to the pinnacle of semiconductor technology. It not only focuses on technological breakthroughs in multiple aspects, but also generously donates to local emerging semiconductor company Rapidus. How likely is Japan to achieve this industry's ambition?

Breaking through technology and increasing investment

According to the Nihon Keizai Shimbun, Canon has recently started selling semiconductor production equipment FPA-1200NZ2C. This device adopts a new technology called "nanoimprinting", which can manufacture cutting-edge semiconductor products required for smartphones, data centers, and other applications more cost-effective and energy-efficient. Unlike previous processes, "nanoimprinting" uses a circuit drawing method similar to stamping, which may reduce the investment required for semiconductor equipment due to the relatively simple production process.

According to the report, Canon's new device can manufacture cutting-edge semiconductor products at the 5-nanometer process level. At present, in order to mass-produce cutting-edge semiconductor products, it is necessary to use devices that are monopolized by ASML in the Netherlands and use "Extreme Ultraviolet Lithography (EUV)" technology. However, this type of device has problems such as high price and high power consumption. In order to launch new devices into the market, Canon began continuous research and development as early as 2014. At the same time, Canon also collaborates with domestic enterprises such as Armor and Japan Printing.

Japanese media reported that in the 1990s, Japan was involved in a semiconductor trade dispute with the United States. Now, it is China that is competing with the United States, which "has a strong will to refuse to cede its advantageous position in cutting-edge semiconductor technology." Against the backdrop of large-scale investment in semiconductor production factories supported by governments in many countries in the United States and Europe, the Japanese government has provided TSMC with a subsidy of 470 billion yen (approximately 23 billion yuan) to support TSMC's cooperation with Japanese companies in building a factory in Kumamoto Prefecture.

It is reported that the Cabinet of Toyoto Kishida will introduce the latest economic policies by the end of October 2023, with the budget of 3.4 trillion yen (approximately 170 billion yuan) applied by the Ministry of Economy and Industry for subsidies to the semiconductor industry likely to be approved.

Supporting Rapidus

After the United States decided to unilaterally impose restrictions on the development of China's semiconductor industry, the Japanese government saw a huge opportunity to restore the semiconductor industry. Currently, Japan is accelerating its support for the semiconductor industry. On the one hand, Japan actively invites overseas semiconductor companies to invest and build factories through financial and tax subsidies. On the other hand, it actively supports the development of domestic semiconductor enterprises, the most prominent of which is Rapidus, which is led by the Japanese government and jointly funded by multiple Japanese companies. The company plans to achieve mass production of the cutting-edge semiconductor in the 2-nanometer process by 2027.

For Rapidus, the Japanese government has generously provided it with a subsidy of 330 billion yen. According to a recent report by Asahi Shimbun, Japan has invested 1.7 trillion yen in Rapidus in addition to 330 billion yen, reaching a subsidy of over 2 trillion yen. Some analysts even believe that the Japanese government may eventually come up with 5 trillion yen.

Rapidus President Junichi Kochi has stated that before establishing the company, he received a phone call from senior executives of IBM in the United States. He stated that the other party hopes to establish a company to produce chips for IBM.

In addition to IBM, platform companies such as Google, Amazon, Apple, and Microsoft in the United States also have a great demand for chips. Due to the lack of investment by Japanese semiconductor companies due to the insufficient domestic market to support competitive chip factories. The 'demand guarantee' from the United States is considered a key driving force for Japan's semiconductor industry to make a comeback.

In order to make a comeback for the semiconductor industry, Rapidus is not only building demand docking, but also strengthening talent recruitment. Rapidus has established a collaborative research mechanism with Belgian research institution IMEC, aiming to address the issue of insufficient research capacity in cutting-edge semiconductor chips in Japan. In terms of lithography machines, the company has long established a cooperative relationship with Asma in the Netherlands.

According to Japanese media reports, Asma plans to establish a technical support base in Hokkaido in the second half of 2024 to provide assistance in building and maintaining the most advanced semiconductor production for Rapidus, and to increase the number of Japanese employees by 40% by around 2028.

Unrealistic nostalgia for past glory

Unrealistic nostalgia for past glory

After entering the year 2000, the Japanese Ministry of Economy, Trade and Industry has been trying to maintain semiconductor enterprises by encouraging mergers between enterprises. For semiconductor companies that are poorly managed and technologically backward, they should save money and provide policies through production, so that these companies can survive as much as possible through mergers.

On the other hand, during this period, the Japanese industry has already lacked the willingness to invest domestically. A large number of Japanese companies are investing abroad, using cheap labor from abroad to build factories closest to the market. Japanese companies hope to turn Japan itself into a research and development center and maintain technological advancement. After a large number of factories moved abroad, there was no longer a huge demand for semiconductor products in Japan, such as home appliances and IT digital products, as before 2000.

The decline in demand for semiconductor products has made the Japanese industry somewhat "indifferent". Although Japan still keeps progressiveness in some raw materials, this is only the result of early research and development of individual materials and leading production technology. Japan has lost the motivation and desire for innovation in the semiconductor industry.

Soon, the ability of Japanese companies to lead semiconductor products based on their first mover advantage began to lag behind in competition. Because in market competition, semiconductor design companies are often the first to capture demand and carry out the latest design, while production is handed over to OEM companies that only produce according to drawings. A horizontal division of labor model has emerged, which includes manufacturer demand, design by non factory enterprises, and production by OEM enterprises. In particular, OEM companies can reduce costs through mass production, which is much more competitive than Japanese companies that solely invest in design, production, and equipment in vertical production. Japanese semiconductor companies are increasingly unable to keep up with the development of the times. After 2006, the market share of Japanese companies in semiconductor products has been continuously declining.

In his new book "Everything in the Semiconductor Industry" published this year, Japanese NEC former engineer Masayoshi Kikudi, who has been engaged in semiconductor research and manufacturing for a long time, analyzed the root cause of the current underdevelopment of Japan's semiconductor industry: compared to their Western counterparts, "herbivorous" Japanese people who have achieved certain success tend to be satisfied with the current situation rather than seeking further development. Nowadays, the focus of the semiconductor industry has gradually shifted from "how to manufacture products" to "what products to manufacture", and even "why to manufacture products for demand". But Japanese semiconductor companies lack a new perspective and development vision.