Reinventing Japan Print E-mail
Written by E. Jan Vardaman   
Friday, 31 May 2013 21:49



A blueprint for change in the Land of the Rising Sun.

Japan’s electronics industry was once the envy of many Asian countries. When I first visited Japan in the mid 1980s, domestic companies were powerhouses in semiconductors, displays, consumer products and automobiles. Fujitsu, NEC and Hitachi were major players in the mainframe business, and Japanese companies played a dominant role in the DRAM market.

The years have not been kind. Japan has suffered an extended economic downturn, not to mention 2011’s triple disaster: earthquake, tsunami and nuclear power plant accident. Today, Elpida, the last domestic DRAM maker, is being absorbed by Micron. Fujitsu still makes high-end servers, but Hitachi and NEC no longer build their own.

A recent summit in Hakone, organized by a Chinese-American CEO, focused on Japanese semiconductor industry woes in the wake of mergers and layoffs.1 While much of the discussion lamented conditions on the fab side, many fundamental changes in electronics could prove a step in the right direction.

Many Japanese companies are restructuring themselves. At the recent International Conference on Electronics Packaging (ICEP) in Osaka, Japan, Panasonic described its R&D strategy to become the leading green innovation company. Panasonic will focus on four categories: residential, non-residential (offices, factories and stores/facilities), mobility (cars and airplanes) and personal space. Others are reinventing and restructuring operations in hopes of a new beginning. Japan is still home to many key suppliers in electronics packaging materials, including mold compounds, leadframes, IC package substrates, bonding wire, solder spheres, die attach and underfill. Japanese companies remain important suppliers of semiconductor fabrication and assembly equipment, and responsible for major innovations.

Toshiba no longer makes DRAMs, but is a major flash memory supplier. It has spun off some operations and has a financial interest in a newly formed outsourced assembly and test (OSAT) service provider, J-Devices. J-Devices has developed a low-cost package that features embedded die using a panel process – a hot area in electronics. It recently purchased Fujitsu’s assembly operations and announced plans to purchase the assembly facilities of Renesas (formed by joining Hitachi and Mitsubishi’s semiconductor operations). While many large companies continue to merge assembly operations, small assemblers are expanding and gaining strength. (Larger companies have always subcontracted to small Japanese businesses.) They have skills and expertise that can be expanded for domestic use, while international use of these resources requires communication skills in a variety of languages, which could be challenging. A number of startup companies in Japan show promise. For example, Bondtech is an equipment company that licensed the surface activated room temperature bonding technology from the University of Tokyo. T-Micro has a 300mm prototype line 3D IC production and provides consulting services. The company also produces bio-electronic devices for the design, production, and distribution of custom brain microprobes for neuroscience applications. The list continues.

It has long been recognized that small high-tech companies are tremendous job creators.2 Small companies also account for a tremendous amount of innovation, Japan has its share of innovative small companies that may not be so well known. For example, nitrogen reflow ovens, used worldwide today, can trace their beginnings to a shop in Japan so small that I had to walk on narrow boards across a rice paddy to see the first system almost 20 years ago. Micronics Japan has evolved from a small company to a major player in the probe card business by making use of key technologies developed at NEC. Japan Rec is a small company making encapsulation materials that has extended its markets to China and India. There are many examples of innovative small companies with ideas in technology, management, and business partnerships that may provide future growth to Japan’s electronics industry.

Change required. Large or small, Japanese companies need creative thinkers in management roles in order to prosper. Companies may need to adopt new business practices and models. A climate for innovation, along with restructuring, is necessary. Being able to respond to changing situations is the key to success. New partnerships can enable expanded business opportunities. Japan experienced unprecedented change during the Meiji Restoration in the late 1800s. A second restoration period is now required.

Recovery possible. While much of Asia is in economic recovery, Japan’s economy is still struggling. There are positive signs. The Japanese government upgraded its assessment of the domestic economy in March for the third straight month. Industrial production, corporate earnings, capital investment and employment have improved.3 With the yen sliding against the dollar, Japanese exports look more attractive. The Japanese government is expected to maintain exchange rates at current levels for some time, benefiting exporters. The Japanese economy and electronics industry can recover. Unfortunately, Japanese politicians have the potential to derail positive economic developments by letting conflict with China over disputed islands create instability in the region. One should never underestimate the ability of politicians to muck things up.

References

1. J. Yoshida, “Japanese Electronics Industry Debates Future Amid Turmoil,” EE Times, April 22, 2013.
2. E. J. Vardaman, “Job Creation in Small High Technology Companies,” master’s thesis, University of Texas, 1981.
3. A. Martin, “Japan Raised Economic View for 3rd Straight Month,” MarketWatch, March 14, 2013.

E. Jan Vardaman is president of TechSearch International (techsearchinc.com); This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Her column appears bimonthly.

Last Updated on Friday, 31 May 2013 23:13
 

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