Excellence: How Japanís Best Prevailed over the Lost Decades

Excellence: How Japanís Best Prevailed over the Lost Decades

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Description: Much attention has been given to what went wrong in Japan's Lost Decades. But some Japanese companies thrived in spite of the many challenges presented by the strong headwinds of this stormy period. These headwinds included: A strong Yen.

A weak banking system. Emergent competitive threats from Korea, Taiwan, and eventually, China. he weakened chain of customers based in Japan.

This presentation examines how Japan's best technology companies not only stayed competitive against these threats, but actually grew market share. From this, it presents the maxims of excellence that can be learned from them and their managements. This includes what they did differently from other Japanese companies that lead to their success.

These maxims will be just as important going forward as the semiconductor industry faces new challenges. The presentation is from my invited keynote at the SEAJ's annual meeting on May 27th. I was deeply honored because it was the first time a non-Japanese speaker had ever been invited to talk at this prestigious forum.

The evening's topic included how the strengths of Japan's best technology companies interleave with a future environment that include 3D structures, nodes going to 5nm, EUV, 450mm; on top of industry consolidation. A key focus was on which strengths of Japan's best technology companies are likely to give it a competitive advantage over the next 20 years.

 
Author: G. Dan Hutcheson (Fellow) | Visits: 4024 | Page Views: 8072
Domain:  High Tech Category: Semiconductors Subcategory: Business 
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Contents:
May 2014

Excellence:

How Japan’s Best Prevailed over the Lost Decades

g dan hutcheson
This report has been reproduced for the SEAJ
It is approved for public release with attribution to VLSIresearch.

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Japan’s Golden Era of Semiconductors
• Japan gained share
– for 3 decades
– it was systematic

• It had better …
– long-term planning
– understanding of how to apply
Moore’s Law to memory
– better workforce
– higher quality
– higher yields
– higher efficiency/lower cost

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Then came the Lost Decades
The strong headwinds
included:
• A strong Yen
• A weak banking system
• Emergent competitive
threats from Korea,
Taiwan, and China
• Weakened customers

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Japan’s Dark Era for Semiconductors
• Japan’s share gains reversed
– it was systematic

• It lost its competitive advantage
– Decision Cycle Times became
more important than long-term
planning
– Over-reliance on memory chips
– Poor access to capital
– Quality advantage became less
important
– Higher cost and lower yield

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A Reminder …

It's the moment you
think you can't that
you can
— Celine Dion

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What Went Right in the Lost Decades
• Many challenges, yet …
• Some Japanese companies
thrived …
So, I will choose two from the
many great Japanese companies

– Tokyo Electron Ltd.
– Advantest
To provide the essence of what is
good from my perspective
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Why TEL & Advantest are good examples
• Against an economy that was
sinking in global share …

• TEL & Advantest
gained share

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TEL & Advantest vs. Japan’s Chip Makers
• With a home customer base
that was sinking in global
share …

• TEL & Advantest
gained share
So what can be
learned from them?
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Take big risks
– swim upstream, learn from failure
• Customer development focus
• Invested on handshakes
– Agree first, contracts later

• Tokyo Electron Ltd.
– Shift from rep to manufacturer
– Heavy Investments in Oregon,
Texas, and New York

• Advantest
– ATE Technology leadership
– T2000 co-development
– Big Iron Memory Testers

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Go Global
• Develop customers outside your
comfort zone
– Expanded early into Taiwan and
Korea

• Tokyo Electron Ltd.
– Focus on AMD, IBM, TI, Samsung, &
Intel
– Drove R&D to customer’s shore

• Advantest
– Name change - Takeda Riken (in 1985)
– NY Stock Exchange Listing
– Focus on Samsung, Hynix, Intel, &
Micron

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Never give up on core strengths
• Stick to what you’re good at
• Take a social focus to
business
– Engage consortia globally
– Solve customer’s problems first
• Trust in getting paid later

– TEL logo : People. Technology.
Commitment.

• Continue to build quality in
– Reliable tools – Fast response
– Spares infrastructure

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Partner Well …
• CEOs are very customer focused
– Broke organizational tendencies to
fall back on the comfortable

• Tokyo Electron Ltd.
– Customer satisfaction logo
– 300mm Technology Center
– Consecutive Intel SCQI awards

• Advantest
– Stayed near the top in customer
satisfaction for 26 years!

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Be customer driven … Really
• Really listen to your customer
– Then empower your people to drive
the organization
– Customers learn you do what you
promise and it builds trust

• But do not follow blindly
– Sometimes what the customer wants
is not what they need
• It may not be profitable to you

– Focus on need & Find benefits
– Don’t be afraid to ask for more
• The return may be in the future, but
there must be a return

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Balance long and short term management
• Profit in the short term
– Price to value
– Manage the cycle
– Be ready for downturns

• Invest in the long term
– Favor needs over wants
– Favor benefits over features

• Advantest
– Adopted profit center and cash
flow management approach in
1992

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More takeaways
from the success of TEL and Advantest
• CEO engagement is critical
– Messaging essential (use of logos)

• Commitment and Trust go hand-in-hand
• People win, not companies
– Trusting employees sets an example for
how to earn customer trust
– They extended the Ringi-sho
– It amplifies in a feedback loop
– Relationships matter
• Build an ecosystem around them

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Now let’s focus on the future

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Structural changes and opportunities
• 60% of capex at 3 customers

• Easier to focus on
– Plays to strength in relationships

– 3 in the $10B club
– All are foundries
– Top 7 hold a 90% share

• Rise of the virtual captive

– Product marketing, not generic
marketing

• Fabless/IDMs less important
– Foundry will dominate

– Apple, Nikon, Huawei, IBM …






IoT/IoE
China passing US in PPP GDP
Moore’s Law slowing
450mm, EUV

• Interesting but not essential
• But not in exchange rated
• Productivity solution needed

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60% of capex is at 3 customers
Company

Semi
CapEx

1

Intel

~ $11B

2

Samsung

~ 12

3

TSMC

~ 10

4

GLOBALFOUNDRIES

~5

5

• Challenge:

CapEx
Rank

SK Hynix

~4

Sales
Rank

Company

w/Foundry
Value

1

Intel

~ $49B

3

TSMC

~ 43

2

Samsung

~ 39

4

Qualcomm

~ 13

13

GLOBALFOUNDRIES

~12

– 3 in the $10B club
– All are foundries
– Top 7 hold a 90% share
• 5 plus Micron and Toshiba

• Opportunity:
– Easier to focus on
– Plays to strength in relationships
• English is the common language

– Focus on product marketing, not
generic marketing

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Rise of the virtual captive
• Fabless/IDMs less important
– Foundry will dominate
– Semiconductor market is bigger
than reported

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Semiconductors: Middle of the supply chain
• Memory is still the big driver
– ~ 40% of cap ex
– Multiple customers
• Samsung, Toshiba, Sandisk, SK
Hynix, Micron Technology

• Cell phones & tablets
– ~ 25% of cap ex
– Dominantly TSMC

• PC still ~20% of cap ex
– Dominantly Intel

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Electronics: Top of the supply chain
• IoT is far off on the horizon
– Just into hype cycle

• Cell phones remain the big
driver
• Tablets now the 2nd largest
growth driver
• PCs are coming back
– But just to neutral

• Auto & Industrial solid drivers
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If you question our impact…
• >86% of the world has a cellphone
• More people have a cellphone than
– Have a toilet
– Or access to clean water

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A Reminder …

The solution to the
problem of
unleashing creativity
is always to
set a target
Akio Morita

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How Pervasiveness fits together
Key Building Blocks:
• Embedded Processing
• Sensors
• Actuators
• Wired/Wireless
• Low Power

Devices+Wireless
+Networks+Internet
+Servers=

IoT+Cloud=

Internet of
Everything

– Batteries

• Cloud Processing
– Big Data
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IoE's Disruptive Potential
and Diffusive Speed into the World
IoE’s impact will span everything
• Transformative for mobile and
consumer

• Transforming Automotive, SCM, and
Defense
• Banking, Construction, and
Healthcare will be the laggards

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If you think about it …

IoE is the next step in
the evolution of the
semiconductor
revolution
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What we can do to
make the
possibilities
possible …

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Against this opportunity are big questions:
• What growth will be needed to pull it off?
– What is the cost of not meeting this growth? No 450mm? No
EUV? Slower scaling?

• What are we doing right and where are we erring or on
the verge of erring?
• How do you prioritize development for fragmenting market
demands?
• Does expanding into adjacent markets help, hurt, or does
the semiconductor industry just have to pay its way?
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Only with these three
kinds of creativity technology, product
planning, and
marketing - can the
public receive the
benefit of a new
technology
Akio Morita

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What about 450mm and EUV?
• New wafer size technology is
always disruptive





Existing installed base
Infrastructure
Competition
Especially in this age of deep
economic understanding
– Cost was not a defining factor
before 150mm

• EUV is proving more difficult
than ever imagined
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Equipment Development Payback Periods
• Extending out to >20 years
– Similar to airframes – K. Ushida

• 450mm will approach 25 years
• 300 mm has been paid back
– And is earning cash

• 200mm was the best ever
– Largely because development
costs were so low

• Pre-200mm development
costs were negligible
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What happens if Moore’s Law Slows
• It could …
• Lithographic and material
challenges are looming larger
than ever before
• But demand growth for
transistors has been steady
despite market conditions
• That means more silicon will
be needed

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Moore’s Law just has to slip to 4 years and:
• Silicon demand explodes
• It’s simple geometry
– If CDs don’t shrink
– And transistor growth continues
– More silicon area will be needed

• Moore’s Law holds back the
need for more silicon
• This has serious implications
for 450mm

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If Moore’s Law slows to 4 years …
• Major capacity expansion will
be needed to produce these
wafers
• The capex share of revenues
will not be sustainable by
2017-2018
• Price-per-Transistor will have
to rise
• Thereby ending the golden
years of Moore’s Law
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The fundamental questions to answer are:
• If you don’t believe a 2-year
clock is sustainable, then you
have to believe that 450mm is
essential
• If you do believe, then 450mm
is not needed
• How will the electronics
industry change if Price-perTransistor rises

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If Price-per-Transistor rises
• What happens to transistor
growth and hence silicon and
equipment demand?
• It could go either way. But …
• The answer may lie in the auto
industry’s history
– Note demand for it still grows

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Cost-per-Auto built bottomed in 1918
• Ford drove car costs down
with significant manufacturing
innovations until hitting bottom
• Then car prices started to rise





Prices bottomed at $242
In today’s $’s = $3760
Ford average MSRP = $33,608
That’s 10X!

• But auto demand continued to
rise as well
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The ‘go-to-zero’ scenario for autos is …
• People stop buying cars
• Now how many people do you
know that go out to a cold barn
in the morning, feed their
horse, and then ride it to work
every day?
• Not only did the auto industry
fail to go to zero; it went on to
become the center piece of an
oil fueled economy
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Try to imagine a world without semiconductors
• Mechanical calculators and
slide rules
• Massive amounts of air
pollution
• The economy would be
smaller

• Miracle drugs would not be
here
• They could not model the
molecules
– for lack of compute power

• Simply dealing with the statistical
calculations for regulatory
approval would be too costly

– No banking innovations

• Food production would be
lower and spoilage higher

– And this is an extremely short
list

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Semiconductors are too valuable to go away
• Like autos in 1918 …
• Chips in 2014 have just begun
to climb the mountain
• So we all have plenty of work
to do
• And there is plenty of
opportunity for Japan

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This Month in Semiconductors includes:
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about VLSIresearch
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Meet the Team

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