Tech

Lessons from Japan’s Semiconductor Industry: Strategies for China’s Continued Development

  The Japanese semiconductor industry has been slowly declining since it reached its peak in the 1980s. However, it would be a serious misunderstanding to simply think that the Japanese semiconductor industry has failed. Today, the Japanese semiconductor industry still has very competitive companies and products.
  An objective understanding of the success or failure of Japan’s semiconductor industry and the reasons behind it has a very strong reference value for China, which is vigorously developing its semiconductor industry.
Why is the Japanese semiconductor industry gradually lagging behind?

  Many people believe that the Japanese semiconductor industry surpassed the United States in the late 1980s, but this is not very accurate. In the 1980s, Japan surpassed the United States in the field of DRAM (dynamic random access memory), but it was not that the semiconductor industry as a whole surpassed the United States.
  In the 1980s, the overall quality stability and production efficiency of Japanese industrial products caught up with major developed countries in Europe and the United States. This was not a phenomenon unique to the semiconductor industry. After the war, Japan continued to obtain various new technologies from the United States and Europe, and at the same time continued to occupy the American market through price advantages. Before the Plaza Accord in 1985, the Japanese yen exchange rate was relatively low, and Japan’s labor costs were lower than those in Europe and the United States, so it had a price advantage. Japan’s business management characteristics are also the reason why it can catch up with Europe and the United States. Since the 1950s, Japanese companies have implemented a total quality management system (TQC). In the 1970s, many Japanese companies carried out ND (No Defects) activities to create a production system with zero defects. The United States has always adopted a probabilistic approach, which only requires a certain pass rate. Behind this are the differences in national personalities and cultures between the United States and Japan.
  In the 1990s, the global influence of Japanese semiconductor companies slowly declined. There are three main reasons behind this. The first is the obstruction of the United States, which is symbolized by the “Japan-US Semiconductor Agreement” signed by the Japanese and American governments in 1986. This prevents the Japanese government from continuing to support the semiconductor industry on a large scale, resulting in a slowdown in the expansion of Japanese companies. Second, Japan’s bubble economy burst in the 1990s, and Japanese companies faced multiple pressures at the same time: a sharp appreciation of the yen, saturation of the Japanese domestic market, and a serious decline in corporate profitability. This has resulted in insufficient investment in equipment by Japanese semiconductor companies and a decline in their ability to continue research and development. The third is the rise of neighboring countries and regions. Before the 1990s, the semiconductor market was basically a competition between the United States and Japan. After the 1990s, South Korea and Taiwan, China also joined the competition. The rapid development of the semiconductor industry in the 1980s resulted in the installation of most semiconductor manufacturing technologies, and the technology accumulation of the previous decades was condensed into semiconductor manufacturing equipment. By purchasing relevant equipment, South Korean and Taiwanese companies will have a good foundation for catching up.
  At the same time, Japanese companies have not cultivated EDA (Electronic Design Automation) companies. This is related to the fact that Japanese society has long attached great importance to manufacturing and despised the software industry. It is also related to the lack of capital market in Japan to support emerging enterprises. When the Japanese semiconductor industry was at its peak in the 1980s, each large Japanese company developed and designed software on its own and regarded it as its own competitiveness and was unwilling to disclose it to the outside world. This resulted in the failure of Japan to produce EDA companies. Japan is like this in the fields of industrial design software, simulation software, and statistical software. They close their doors and work alone, resulting in Japanese companies always lagging behind the United States and Europe in the field of industrial software.
Japanese semiconductor materials remain strong

  Dozens of raw materials are used in the production process of chips, including solid, liquid and gas. Japanese companies have a strong presence in most chip raw materials.
  Photoresist field: JSR, Tokyo Applied Chemical Industries, Shin-Etsu Chemical Industry, Sumitomo Chemical, Fujifilm; Electronic-grade silicon wafer field: Shin-Etsu Chemical Industry, SUMCO; Mask field: Dainippon Printing, Toppan Printing, HOYA; Semiconductor production Special gas field: Taiyo Nippon Sanso, Air Water; chemical related companies: Kanto Chemical, Resonac (renamed after Showa Denko acquired Hitachi Chemical), Daikin Industries, Nippon Zeon, Sumitomo Seika, Chuo Glass, Iwatani Industrial, Mitsui Chemistry, Kanto Denka Industry, ADEKA; various special chemical and pharmaceutical fields used in semiconductor production: StellaFarma, Sumitomo Chemical, Kanto Chemical, Nippon Kayaku, Tokyo Onka Industry, Mitsubishi Gas Chemical, Mitsubishi Chemical, Daikin Industry, Morita Chemical industry, Tokuyama; Various target material fields for semiconductor production: JX Metals, High Purity Chemical Research Institute, Ulvac, Mitsui Mining & Mining, Tosoh; High purity water field: Kurita Industry, Organo, Nomura Fine Science; CMP abrasives and polishing pads: Fujifilm, Fujimi, Resonac, JSR, Toppan, Fujibo; quartz products: AGC and Tosoh.
  Semiconductor materials are an area with very high technical barriers in the materials industry. Semiconductor materials have very high purity requirements. For example, the purity requirement for silicon is 11N, which is 99.999999999%. A semiconductor factory requires a large amount of high-purity water for cleaning every day. The water purity requirement is also above 6N. Not every country has the ability to produce this kind of high-purity water.
  The strength of Japanese semiconductor materials is due to two factors. First, the Japanese electronics industry as a whole was very developed in the 1970s and 1980s. At that time, Japanese companies in various industries were facing the problem of developing new businesses, and many companies joined the semiconductor material production team. For example, Dai Nippon Printing Co., Ltd. is a printing company that has been established for 150 years. It transferred the plate-making technology of the printing industry to the field of masks and became the world’s largest mask manufacturer. The research and development of semiconductor materials requires a lot of money. Japanese companies generally diversify their operations and cross-invest, making up for the shortcoming of Japan’s underdeveloped capital market.
  Another factor is that the precision chemical materials industry is more closed than other industries. Not only the Japanese semiconductor materials industry, but also the high-tech materials industries in other countries. The production equipment is designed and customized by the development companies themselves, and there are no standard industrial products on the market. These companies often deliberately do not apply for patents on their technologies, but instead keep them as black boxes. It is difficult for late-developing countries to imitate other than research and development.
  ABF from Ajinomoto, Japan’s largest food company, is a material that must be used in semiconductor production. ABF is the abbreviation of Ajinomoto Build-up Film, which is Ajinomoto build-up film. It is used as an insulating material for CPU. Ajinomoto currently dominates this market. Ajinomoto means MSG in Chinese, and the company has a history of more than 100 years. In the 1970s, Ajinomoto Company explored the use of technology accumulated in amino acid production to develop some new products and materials. In 1996, Ajinomoto Company began to develop film-type insulators and succeeded in about four months. But it took about three years to get semiconductor companies to use the material, and Ajinomoto has had the segment to itself ever since. In addition to a large number of patents, Ajinomoto’s moat also includes a large number of technical secrets in production processes, which constitute a high barrier to entry.
  There is a wide range of semiconductor materials. For example, in the chip production process, an electronic suction cup is required to transfer wafers. Currently, Japan’s NTK Ceratec Co., Ltd. is the leader in this market segment. The company is a subsidiary of Japan Specialty Ceramics (NTK), a well-known company in the field of industrial ceramics in Japan.
Japanese semiconductor equipment remains strong

  Ranking of semiconductor manufacturing equipment companies around the world, the top 15 are generally distributed as follows: 6 companies in the United States, 6 companies in Japan, 2 companies in the Netherlands, and 1 company in South Korea. The leading companies in Japan are as follows: Tokyo Electronics, Advant, Nikon, SCREEN, Disco, Kokusai Electric, Canon, Tokyo Precision, Lasertec, TOWA, Ebara, and Ulvac.
  In addition, Japanese companies also have a strong presence in the handling equipment of semiconductor factories, including Murata Machinery, Daifuku, Rotze, etc.; the same goes for wafer inspection equipment, mainly including Hitachi High-Tech, Lasertec, etc.; the same goes for probe stations, mainly Two companies, Tokyo Electronics and Tokyo Precision.
  Japan’s semiconductor manufacturing equipment industry started in the 1970s. Before the 1980s, the United States dominated the development of the semiconductor industry, and the overall industry scale was relatively small. At that time, Japan mainly imported equipment from the United States. Tokyo Electron has always been Japan’s largest company specializing in semiconductor manufacturing equipment. The company was founded in 1963. Its sales revenue in 2019 was 1.3 trillion yen, of which semiconductor manufacturing equipment accounted for 91% and FPD (flat panel display panel) manufacturing equipment accounted for 9 %. The company initially imported American semiconductor equipment and products and later developed them itself. Tokyo Electronics has maintained steady growth over the past 50 years.
  Tokyo Electronics is a special case. Many well-known companies in the industry gradually entered the field of semiconductor manufacturing equipment during the semiconductor development trend after the 1970s. For example, Nikon and Canon entered the field of photolithography machines because of their previous accumulation of optical technology and precision processing technology. Murata Machinery Co., Ltd. is a company located in Kyoto. It was established in 1935. The company initially produced textile machinery, and this business still exists today. In the 1960s, Murata Machinery began to enter the field of logistics equipment. In 1979, it successfully developed the unmanned automatic transport vehicle ROBO-FAMILY. In 1982, it developed a heavy object transport robot. In 1986, it developed an aerial transport system for dust-free workshops and entered the field of dust-free transport. .
  SCREEN is a Kyoto company with a century-old history. The company’s origin is printing and platemaking. Ebara is Japan’s largest pump manufacturer. Semiconductor manufacturing production lines require a large number of various high-end pumps. Ebara entered the semiconductor industry from pumps (vacuum pumps, liquid pumps, etc.), and then developed CMP (Chemical Mechanical Polishing) equipment. It is currently the second largest CMP equipment company in the world. Hitachi High-Tech is a subsidiary of Hitachi Group. Japanese companies worked hard to develop high-end electron microscopes after the war. Later, Hitachi and Japan Electronics (JEOL) occupied major global markets. The main market for semiconductor inspection occupied by Hitachi High-Technology’s electron microscopes is natural results.
  Japan’s precision manufacturing industry is very strong as a whole, and semiconductor equipment manufacturing is one of them. After the 1990s, Japanese users gradually declined, but Japanese semiconductor manufacturing equipment companies still maintained strong competitiveness.
  There are three reasons: first, technical barriers, manufacturing high-precision complex machinery requires technical accumulation; second, continuous research and development and product upgrades. The semiconductor industry is constantly developing and progressing, which requires equipment suppliers to improve at the same time. For example, Tokyo Electronics’ research and development was carried out four generations in advance. Basically, the equipment it is developing now is the equipment that will be used ten years later. The third is the co-evolution of equipment manufacturers and customers. High-end equipment does not end after being sold, and operation and maintenance are also very important. For example, an EUV lithography machine requires ASML to station about six engineers all year round for on-site maintenance. An ordinary photolithography machine requires more than three months of training to be proficient in operating methods and techniques. Equipment manufacturing companies and users are deeply bound. Once a cooperative relationship is formed, it is difficult to break unless there are special reasons.
  Many people have the misconception that we are only bad at lithography machines, and other things are easy to handle. In fact, semiconductor factories require hundreds of types of equipment, not just photolithography machines. For example, for vacuum pumps and various other types of pumps, the UK’s Edwards and Japan’s Ebara currently occupy most of the market share globally.
  Here is an example with Japanese characteristics. Everyone knows that the hardware of a lithography machine has three major components: light source, lens group and precision brake workbench. The Japanese company that provides light sources for lithography machines is called Gigaphoton. The company is a wholly-owned subsidiary of Komatsu Manufacturing Co., Ltd., Japan’s largest engineering machinery company. The company was founded in 2000 and was previously part of Komatsu Research Institute. Currently, Gigaphoton provides light source systems for more than 2,000 lithography machines. Japan does not have a developed capital market like the United States, and innovative financing is not as convenient as the United States. However, Japan is also constantly exploring new areas, and its funding sources mainly rely on cross-subsidies within enterprises. Japanese companies often have multiple business lines, and profitable businesses use part of their profits to support basic research and development and new product development. Gigaphoton is a typical example.
  The examples of Komatsu and Gigaphoton are very common in Japan. Idemitsu Kosan is a large Japanese oil company whose main business is oil trading. The company began developing OLED materials in 1985 and launched the product in 1999 after going through hardships. Currently, the company is tied with Germany’s BASF as the most important raw material supplier for OLED. In recent years, Idemitsu has been intensively researching electrolytes for solid-state batteries, and the number of related patents ranks among the best in the world.
Why did Nikon lose to ASML in the lithography machine competition?

  In the mid-1980s, Nikon and Canon emerged in the field of photolithography machines, defeating their American teachers. In 2002, Nikon lost market share to Dutch ASML. At this time, there is basically no technical gap between the two parties, and the combined market share of Nikon and Canon still exceeds that of ASML. But after 2007, the technological gap between the two sides became wider and wider. Today, ASML is unique in manufacturing the most advanced EUV lithography machines. The author believes that the following factors are more important.
  The first is the international competition situation. In the 1980s, Japan’s semiconductor industry developed rapidly. In the late 1980s, its market share exceeded that of the United States. The United States later forced Japan to sign a Japan-US Semiconductor Agreement to block the Japanese semiconductor industry. The indirect result of Japan-US semiconductor friction is the rise of South Korea, Taiwan, and the Netherlands. In the lithography machine market, Samsung and TSMC, as users, certainly expect to have a variety of choices so that they can have bargaining power. Around 2000, Intel, Samsung and TSMC successively became shareholders of ASML, essentially forming a strategic cooperation alliance, while Japanese companies were excluded.
  The second is the changes in Nikon itself and Japan’s domestic environment. Nikon’s original name was Nippon Optical Industry Co., Ltd., which was founded in 1917. It was a company established by the Mitsubishi Zaibatsu at that time to produce military optical products (optical rangefinders, telescopes, etc.). In 1988, the name was changed to Nikon Co., Ltd. After the war, Nikon’s main source of revenue came from cameras. After the 1990s, the revenue of photolithography machines exceeded that of cameras.
  Nikon entered the field of photolithography machines because of its industrial foundation in optical lenses and precision machinery (including light wave interferometers, etc.). From 1975 to 1980, Japan’s Ministry of International Trade and Industry organized the “Super LSI Joint Research Institute” to carry out joint research on ultra-precision processing substrate technology for semiconductor products. At that time, hundreds of technical personnel were mobilized from Fujitsu, Hitachi, Mitsubishi Electric, NEC and Toshiba to jointly tackle the problem.
  The “Super LSI Joint Research Institute” commissioned Nikon and Canon to develop lithography machines. In essence, the Japanese government funded the research of lithography machines by Nikon and Canon. Around 2000, the IT bubble burst in the United States, semiconductor investment declined, and Nikon’s operating pressure was very high. If Nikon had accepted Intel’s equity investment at that time, the outcome might have been completely different. But Nikon is owned by the Mitsubishi Zaibatsu, so it is unrealistic to accept equity investment from Intel. The overall environment at that time was that Japanese companies were very repulsive to foreign companies taking shares.
  Among the two Japanese photolithography companies, Nikon is stronger than Canon in terms of basic optical technical capabilities. Canon later developed copiers and printers, which became the company’s main profitable products. Nikon is mainly about cameras and photolithography machines. After the bubble economy, Japan’s integrated electrical companies that produce semiconductors have struggled, and Japan’s share of the world’s semiconductor market has continued to decline. Under such circumstances, it is difficult for the Japanese domestic market to support two lithography machine companies, and Nikon and Canon failed to integrate the lithography machine business in time and instead continued to compete with each other.
  The third reason is that ASML has always followed a globalization path, while Nikon focuses on the Japanese domestic market. The Dutch domestic market is very small, and there were no large semiconductor companies in Europe in the 1990s. From the very beginning, ASML must take the international route.
  When it comes to ASML, domestic media are always keen to introduce that the American Cymer provides the light source, and the German Zeiss provides the lens. Our understanding of lithography machines cannot stop at this level. The continuous development and progress of a company’s technology requires the support of the market and continuous feedback from customers. Simply sourcing high-quality parts from all over the world will not create a perfect device. The control programs behind precision machinery such as lithography machines are all software. Software is as important as hardware such as light sources and lenses. ASML controls software development itself.
  In 1982, the municipal government of Flanders, Belgium decided to cultivate the microelectronics industry. In 1984, local governments, business circles and universities jointly formed IMEC, a non-profit organization. At the same time, MEITEC, a semiconductor product manufacturing plant, was established. The first acting chairman is Professor Van Overstraeten of the famous University of Leuven. ASML and IMEC have maintained a close cooperative relationship for a long time. In 1989, ASML delivered a 248-nanometer lithography machine to IMEC. In 1989, 193-nanometer photolithography machines were provided. In 2003, 157nm lithography machines were provided. In 2004, a liquid immersion lithography machine was delivered. In 2006, the first EUV prototype was delivered. In the early days of ASML’s development, IMEC provided technical support and feedback to ASML, which had a huge impact on the development of ASML.

  After 2000, ASML formed a relatively stable alliance with the world’s three largest lithography machine users, Intel of the United States, Samsung of South Korea, and TSMC of Taiwan, China, and the overall situation has been decided.
  In its early days, Nikon had a lot of technology accumulation and the Japanese domestic market was relatively large, so Nikon followed the domestic collaboration route. After 2000, Japanese end users continued to decrease, Nikon’s revenue continued to decline, and R&D investment could not keep up. In fact, Nikon built an EUV prototype in 2007, only one year later than ASML. The prototype was developed for the Japanese research group Selete. Selete is a semiconductor technology joint development company established in 1996 by ten major Japanese semiconductor companies with each investing 500 million yen. The ten companies are: Fujitsu, Hitachi, Panasonic, Mitsubishi Electric, NEC, OKI, Sanyo Electric, Sharp, Sony, and Toshiba.
  The subsequent development trend was obvious, and Nikon lost to ASML. The price of an EUV lithography machine exceeds US$150 million. The cost of developing such equipment can be imagined. Without financial support, Nikon would not risk R&D. But the Japan-US semiconductor agreement limits the Japanese government’s ability to act. However, in addition to chip lithography machines, Nikon also has a major source of income after 2006 – FPD lithography machines, which are the lithography machines used in the production of LCD panels. In this field, Nikon and Canon have always occupied the major market share.
What are the characteristics of Japan’s long-standing semiconductor products?

  Japan has always been strong in the fields of semiconductor manufacturing equipment and semiconductor materials. In addition, Japan still has some semiconductor products that maintain a relatively strong presence around the world. Mainly CMOS Image Sensor (semiconductor products that convert optical signals into electronic signals, mainly used in fields such as digital cameras and smartphone cameras), power semiconductors (semiconductor products that control power in various devices), and NAND Flash Memory , automotive microprocessors (microprocessors that control various functional units including the engine), LEDs (LED lights are also a generalized semiconductor product).
  There are two most important reasons why Japanese companies in these types of semiconductor products can persevere tenaciously until now: (1) stable application scenarios; (2) technological originality and productization remain at the forefront.
  Stable and expanding application scenarios are very important. Semiconductor products must be applied to a specific product. After the 1990s, the few semiconductor products that Japan has survived have grown steadily in domestic and foreign markets.
  Case 1: CMOS Image Sensor. CMOS Image Sensor is closely related to the rise of Japanese digital cameras after the 1990s. Both parties support each other and have positive interactions. After the war, the Japanese camera industry flourished, and Japanese camera brands represented by Nikon became popular all over the world. After the 1990s, Japanese camera companies and electrical machinery companies have successively entered the field of digital cameras. Japanese companies have always occupied more than 90% of the global digital camera market share. Generous market returns have given Sony more R&D motivation. The continuous improvement of the performance of CMOS Image Sensor has enhanced the charm of digital cameras and mobile phones and created a larger market. It is a standard positive interaction. Among them, Sony began the research and development and application of CCD as early as the 1970s, and has been continuously accumulating and making progress in this field.
  Case 2: Automotive microprocessor. In 1980, Japan’s automobile production reached about 10 million units, making it the world’s largest automobile producer. Automotive microprocessors are closely related to U.S. environmental regulations and the oil crisis of the 1970s. The United States introduced the “Atmospheric Cleanup Amendment Act of 1970” in 1970, also known as the “Muskie Act”. The bill imposes stringent emission reduction requirements on vehicle exhaust emissions that many car companies believe are impossible to achieve. Some American automobile companies began to commission Japanese companies to develop microprocessors that control automobile engine fuel injection and exhaust gas reburning. After more than five years of hard work, Toshiba successfully developed this microprocessor for Ford in the late 1970s. Later, the technology was transferred to various Japanese automobile companies. Japan’s Renesas Semiconductor has survived tenaciously because its main products are automotive semiconductors.
  Case 3: Power semiconductor. At present, the top ten power semiconductor companies in the world come from Germany, Japan and the United States. Germany’s Infineon is the strongest, far ahead. Japanese companies occupy four or five seats among the top ten, generally Toshiba, Mitsubishi Electric, Fuji Electric, Hitachi, and Rohm. Except for Rohm, which is a specialized semiconductor company, several of these companies are “integrated motor” companies, that is, diversified companies like Germany’s Siemens. Infineon is a company spun off from Siemens.
  The technical routes of semiconductor products such as power semiconductors and DRAM are very different, and Japan has formed a positive cycle in this field. For example, Toshiba launched the world’s first inverter civilian air conditioner in 1981. The core of the inverter device was power semiconductors. In the 1990s, Japan was the first to introduce IGBT into railway vehicles and Shinkansen vehicles, which greatly promoted energy conservation in the railway field.
  Case 4: LED. After the 1990s, Japan dominated the development of LED-related fields, mainly because Japanese scientists made a breakthrough in blue LED technology in the early 1990s. Among the three primary colors, blue-emitting LEDs are the last to break through. In 2014, three Japanese scientists, Isamu Akasaki, Hiroshi Amano, and Shuji Nakamura, won the Nobel Prize in Physics for their contributions to blue LEDs. Nichia Chemical, where Shuji Nakamura works, is a small-scale chemical company located in Tokushima Prefecture, Japan. Because of the development of LEDs, the company has grown for 20 consecutive years.
  Case 5: NAND Flash Memory. Toshiba has always maintained strong competitiveness in this field. The most important reason is that this product was invented by Toshiba. Toshiba’s Fujio Sugaoka invented NAND Flash Memory around 1984, and Toshiba’s technical advantages in this area continue to this day.
Can Japan’s semiconductor industry regain its former glory?

  Entering 2023, Japan’s Topix Index has returned to its peak at the end of the bubble economy in 1990. Land prices in the core areas of Tokyo, Japan, have returned to their peak levels in 1989 in 2021. So, can Japan’s semiconductor industry regain its glory in the 1980s and 1990s? The author believes that the decline of Japan’s semiconductor industry has stopped, and there is a high probability that it will rebound in the future, but it will not return to its past glory.
  The most important reason why the Japanese semiconductor industry stopped declining is the change in the international environment, that is, the friction between China and the United States and the tension in the Taiwan Strait. Against this background, Japan’s strategic position has undergone some subtle changes. Western countries, led by the United States, have a strong sense of crisis over their over-reliance on chip foundry and packaging in Taiwan, China. At the same time, the Japanese government seized the opportunity and launched some subsidy policies to support TSMC in setting up a factory in Kumamoto Prefecture, Japan. In 2022, Japan will establish a new national semiconductor company, Rapidus, which plans to set up a factory in Hokkaido.
  Not only will Japan not regain its past glory, neither will the United States. In the 1980s, the semiconductor industry was basically dominated by American and Japanese companies. Now, companies from major countries around the world are competing in this industry. This great international competition and division of labor began in the 1990s. For example, among the top ten semiconductor software companies, there are four in the United States, two in the United Kingdom, two in China, one in Canada, and one in Israel. They are ARM (UK), Synopsys (US), Cadence Design Systems (US), Imagination Technologies (UK), CEVA (Israel), SST (US), VeriSilicon (China), Alphawave (Canada) eMemory Technology (Taiwan, China) , Rambus (USA).
  In an era of highly specialized division of labor in the global economy, we usually do not think that countries with semiconductor industries also have hidden champions in the semiconductor industry. For example, Austria, a country that seems to have nothing to do with semiconductors, also has two hidden champion companies, IMS Nanofabrication and EV Group. IMS Corporation is a global leader in multi-beam mask writers. We all talk about EUV lithography machines, but the lithography masks used by EUV lithography machines have higher manufacturing precision than EUV, and are drawn by electronic lines. The main competitor of IMS is Nuflare, a subsidiary of Toshiba Corporation, which was acquired by Intel in 2016. EV Group is No. 1 in the global market for wafer bonding equipment, a precision process that bonds silicon wafers into chips. Most CMOS image sensors manufactured by Sony, Samsung, and OmniVision use EV Group’s technology.
  Whether Japan can gain more influence in the semiconductor industry in the future depends on the R&D capabilities of Japan’s entire semiconductor industry chain, especially whether it can continue R&D and epitaxy in its own areas of advantage. For example, Canon and Dainippon Printing have been actively developing nano-suppression technology in recent years, and have officially launched related equipment in October 2023. If this technology is successful, manufacturing costs will be significantly reduced compared to using photolithography machines, which will erode ASML’s market share.
Enlightenment to China’s semiconductor industry

  In recent years, the United States has continuously blocked the development of China’s semiconductor industry. The author believes that China is very painful in the short term, and the United States may be even more painful in the long term. The reason is simple. China is the largest semiconductor market. The containment by the United States will force China to accelerate domestic substitution of the entire semiconductor industry chain, which means that American companies will lose this huge market in China.
  China can consider today’s response from three perspectives. The most important thing in the short term is to stabilize relations with the United States and other major developed countries. After the 1990s, the United States has been unable to build a complete semiconductor industry chain on its own. This is why the United States is now wooing the Netherlands and Japan. In the medium term, it is most important to accelerate the introduction of overseas talents and cultivate domestic semiconductor-related talents. Within ten years, most of the work we have done has been domestic substitution, and many subdivided areas are technologies and products that have been implemented in developed countries 10 or 20 years ago. In the long run, if China wants to dominate the semiconductor industry, it will need to make breakthroughs in basic theory, otherwise it will be difficult to become a semiconductor power.
  In the future development of the semiconductor industry, China is not without advantages. The author believes that the currently booming fourth industrial revolution is a once-in-a-century opportunity for China’s semiconductor development. The fourth industrial revolution kicked off around 2020, with two main contents, namely DX and GX. DX is Digital Transformation, the digital transformation of the global economy, the most important of which is artificial intelligence. GX is Green Transformation, the green and low-carbon transformation of the global economy, the most important of which is the shift from fossil energy to renewable energy. The first three industrial revolutions were led by European and American countries. In the fourth industrial revolution, China, Europe, the United States and Japan are on the same starting line.
  In this industrial revolution, the automobile industry will also usher in a once-in-a-century major change. The car will become an intelligent product. Currently, a high-end electric car requires about 1,000 chips (not all high-end chips) and about 100 sensors. New energy vehicles are the largest application market for semiconductor products, and China’s new energy vehicles have reached the forefront of the world.
  In the carbon neutral era, the proportion of renewable energy sources such as photovoltaics and wind energy will increase, and power semiconductors will have more application scenarios. Currently, the third generation semiconductors represented by silicon carbide and gallium nitride are also important areas that various countries are competing for. In this field, China is also in the first camp.
  Looking back over the past 70 years, when the Japanese semiconductor industry was developing relatively smoothly, it had relatively good application industries. The two had a mutually supportive and positive interactive relationship. Before the 1980s, transistor radios, electronic calculators and televisions provided huge application markets for semiconductor products. Japan’s LCD industry also accumulated early technology due to the application of electronic calculators. After the 1980s, it was computers, and after the 1990s, it was personal computers, digital cameras and mobile phones. After 2007, personal computers and smartphones became the two largest industries applying semiconductor products. However, Japanese companies lost their leadership in the development of these two industries, which directly led to the sluggish revival of the Japanese semiconductor industry.
  Not only Japan, but also the U.S. semiconductor industry. Semiconductor products before the 1980s were very expensive. In the United States, orders from the military industry and scientific research departments support the development of the semiconductor industry. After the 1990s, Intel ranked first in the global semiconductor industry for 30 years. This was because Intel provided the most important semiconductor product at the time, the CPU. Entering 2023, the American company Nvidia has become the world’s largest semiconductor company by market value. This is because the company’s GPU is the most important semiconductor product in the era of artificial intelligence.

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