Japan Inc. Rethinks Its Semi Strategy

Tough Economic Times Force Changes at Equipment Companies

TOKYO —  It is evident here at Semicon that Japan’s continued economic woes are changing the way Japanese equipment companies do business.

Alas, Electronic News (the print edition): we hardly knew ye!Even in the midst of a lengthy recession, executives and analysts cling to evidence of a recovery for the latter quarters of 2002. Yet, even if this takes place, the days of Japan Inc. and its us vs. them mentality are over, and the Japanese readily acknowledge and accept this.

Perhaps the most visible aspect of this phenomenon is Canon Inc.’s embrace of two-year-old Austin metrology start-up nLine Corp. Canon announced that its sales and distribution subsidiary, Canon Sales Co., would function as a sales partner for nLine, selling its newly unveiled direct digital holography Fathom tool in Japan.

Canon Sales is the distributor for a number of third-party tools in Japan, not just Canon’s own semiconductor equipment, explained Hiroshi Shibuya, director and group executive for Canon’s semiconductor equipment sales. Many companies approach Canon’s sales arm to represent them in Japan, but they must meet very strict criteria, Shibuya said. But he found nLine’s technology impressive, suggesting that it has strong potential, and he felt that the two companies would be able to establish a mutual trust between them, he said.

Kyodai Brothers perform outside Tokyo at SEMI Japan 2001
Tradition meets Tech: The Kyodai brothers of Michinoku, Japan, played the shamisen at the opening of Semicon Japan outside of Tokyo. The Kyodai brothers are well known throughout Japan.

While it’s too early to declare a trend, perhaps, the agreement is not without precedent. At last year’s Semicon Japan, Japanese OEM giant Tokyo Electron Ltd. (TEL) announced that it would handle sales and support throughout the world for start-up NuTool Inc. and its copper electrochemical mechanical deposition tool and technology. The move raised a lot of eyebrows in the industry, but TEL heartily endorsed the Silicon Valley start-up. Tetsuro Higashi, TEL president and CEO, said that NuTool’s technology would permit the Japanese OEM to penetrate the market for interconnect process technology.

The idea of Canon’s and TEL’s embrace of American companies and technology would have seemed laughably ridiculous not too many years ago, when Japanese automobiles and electronics dominated America and there was talk that the United States would exit the chip industry all together.

Now, the roles have been reversed. Japan is struggling to move away from the troubled DRAM-dependent semiconductor business model and expand into other areas—system LSI, as opposed to system-on-a-chip, is the current buzzword on this side of the Pacific.

Canon and TEL aren’t the only ones looking west. Specialty etch tool OEM Tegal Corp. announced at the show joint development partnerships with three Japanese microelectronic companies. They look to Tegal for manufacturing process expertise in order to enter the market for nonvolatile memory.

Meanwhile, U.S.-based OEMs August Technology, Ultratech Stepper and Kulicke & Soffa, and European OEM Unaxis Balzers announced that they were joining Japanese tech and OEM companies Dainippon Screen Manufacturing, Ebara and Casio Computer Co. in the newly created Advanced Packaging and Interconnect Alliance (APiA). APiA wants to accelerate the development and implementation of commercially viable advanced packaging technologies.

Semi Japan 2001 in Chiba, outside Tokyo
While participation may be down, particularly among other Asian countries, many exhibitors expressed surprise at the number of Japanese customers at Semicon Japan particularly interested in advanced technologies, even though there is little, if any talk of equipment purchases at the current time.

Many of the OEM executives involved in these partnerships noted that as chip technology becomes more complex, it becomes more costly to invest. While Tegal’s Japanese subsidiary has been established in Japan for 16 years, its new partnerships weren’t struck solely on Tegal’s reputation. The Japanese economy has been hurting for so long that it has created opportunities for foreign companies to become more involved in the domestic Japanese semiconductor business, said Jim McKibben, VP of worldwide marketing and sales for Petaluma, Calif.-based Tegal.

This trend may be most dramatically evident in Japan, but the phenomenon isn’t limited to this side of the Pacific, suggested Mike Parodi, Tegal chairman, president and CEO. “I see a change in the complexion of the industry … It’s driving relationships that wouldn’t have occurred before,” he said.

The business climate has changed so much here, that some U.S. OEM executives are openly wondering what will happen to the Japanese chipmakers during the next upturn. With investment in technology seemingly at an all-time low in tech-hungry Japan, they question if the Japanese will be able to compete with the global market, or if they will eventually be forced to exit not just DRAM, but the chip market altogether.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.

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