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Kahaner report -- Semiconductor related
From: David Farber <farber () central cis upenn edu>
Date: Sun, 26 Feb 1995 12:08:06 -0500
Dr. David K. Kahaner Asian Technology Information Program (ATIP) Harks Roppongi Building 1F 6-15-21 Roppongi Minato-ku, Tokyo 106 Tel: +81 3 5411-6670; Fax: +81 3 5412-7111 ABSTRACT. (1) Summary report surveying the current status and future outlook for the Japanese semiconductor industry, from the Electronic Industries Association of Japan (EIJA), (2) Semiconductor Industry Research Institute Japan (SIRI), (3) Earthquake impact on semiconductor industry - update. (1) STATUS OF JAPANESE SEMICONDUCTOR INDUSTRY. The following report was published in the Japanese journal Denshi, Jun 1994, pp18-25. Summary of the Report on a Survey of the Current Status and Future Outlook for the Japanese Semiconductor Industry, Mid-Term Vision
From Denshi Jun 1994, pp18-25.
Electronic Industries Association of Japan (EIJA), MidTerm Vision Committee INTRODUCTION The Semiconductor Mid-term Vision Committee (chairman, Ryuichi Ozaki, NEC) of the Electronic Industries Association of Japan (EIJA) has recently compiled the results of a survey regarding the current status and future outlook for the semiconductor industry. The survey was performed by the "Semiconductor Industry, Mid-Term Vision Committee" which is comprised of ten members from major electronic device manufacturing companies, and covers the FY93 business period. For further information contact the following. Electronic Industries Association of Japan (EIJA) (Nihon Denshi Kikai Kogyo Kai) 3-2-2 Marunouchi, Chiyoda-ku, Tokyo 100 Japan Tel: +81 3 3213-1065; Fax: +81 3 3213-1371 (Mr Sugioka) The semiconductors which have come into being during this century have fostered dramatic development of computers and electronic equipment, and have made a wonderful contribution to the building of today's convenient and comfortable society. Semiconductors have come to be used in all sorts of things which surround us, so much so that it would be hard to think of life without them. They will certainly leave an indelible "footprint" in the history of technological advancement of the twentieth century. On the hand, because of the wide scale industrial expansion and advancement of technology which accompanies high-level growth, the semiconductor industry is beginning to face various types of problems. Some of these include excessive investment with lower return on investment, and some are also trade problems. These problems cannot be easily resolved if only an extension of conventional approaches is used. The nature of the semiconductor industry has also changed in the '90s, being driven by "sub miniature fabrication", which is associated with higher integration levels, large quantity production, higher reliability, and faster operational speed. That is, the dramatic improvement of the level of integration has enhanced the functions within LSIs, and LSIs have advanced to the point where they provide the added value and competitive force associated with electronic equipment. As a result, "system-on-chip" products (such as microprocessors and ASICs) have begun to play an important role in the industry, replacing memory chips which have been the driving force in the past. It is inevitable that these changes have begun to widely affect the global semiconductor industry, and has resulted in a resurgence of US. manufacturing companies, advancement of Korean companies, and a stagnation of Japanese manufacturers. In addition, the Japanese economy suffers from the breakdown of the "bubble economy", the high valuation of the yen, and shifts taking place overseas. This places Japan in a serious long-term slump, with wavering confidence and a questionable future. With troubles both at home and abroad, the semiconductor industry should play a major role in the future of Japan. That is, it would be better to clarify the role and vision of the semiconductor industry from a global point of view based on the resurgence of Japanese technology, rather than to focus on the semiconductor industry itself. Therefore, the main theme of this report is not "problems of the semiconductor industry", but rather "the resurgence of Japanese technology". it is our earnest desire that authorities will examine and implement the proposals given in this report to achieve a rejuvenation of the Japanese semiconductor industry. --------------------------------- 1. Current Status of the Semiconductor Market, and Changes in the External Environment The transistor was invented in the United States in 1947, and was used first for American military applications. It then began to be used in consumer applications in Japan. At first, the main application of the transistor was to replace the vacuum tube, but demand for the transistor increased dramatically with the appearance of the integrated circuit. In addition, the achievement of "higher integration, volume production, higher reliability, and lower cost" by the untiring pursuit of sub miniature fabrication, was hastened by the development of the personal computer in the 1986s. This brought about tremendous growth focusing on memory chips. Average annual growth between 1970 and 1993 was 16%, and the 1993 market reached about 80 billion dollars. However, in view of long-term trends, the market is beginning to become sluggish. For example, over the last five years (1989 to 1993), annual growth was 11-12%. Converted to yen (and due to the high valuation of the yen), the annual growth was about 11% between 1970 and 1993, and for the past five years, only 5-6%. This represents a sudden downturn when seen from the Japanese point of view. The "silicon cycle" which is peculiar to the semiconductor industry, has recently begun to change in conjunction with the increasing number of applications. For example, the cycle experiences peaks and valleys, and during 1992, which should have been a peak year, the Japanese market recorded negative growth. The Japanese market also experienced slow growth during 1992, when compared to overseas markets, so it seems that the silicon cycle no longer applies to the Japanese market. Together with the change in the market environment, semiconductor products themselves began to vary widely in 1990. That is, during the 1970s and '80s, higher integration, volume production, higher reliability, and lower cost through the "tireless pursuit of sub miniature fabrication" roused demand, and the memory chip was the typical product. However, in the 1990s, LSIs have acquired a higher level of function as well as improved integration levels, and the LSI now determines even the level of performance and added value of electronic equipment. The LSI is not simply an electronic component anymore; it now plays the role of the "brain" in electronic equipment. The source of the added value in semiconductor products has begun to change from "sub miniature fabrication" to "LSI function". The microprocessor is a typical example. These changes which took place in the '90s are having an especially large influence on Japanese manufacturing companies which have been strong in "sub miniature fabrication". The lower added value associated with memory chips has troubled Japanese manufacturers because it is linked to lower investment efficiency. In addition, the breakdown of the "bubble economy" has done away with the ability to obtain inexpensive investment means. This is why it seems that US. manufacturers have regained the lead from Japanese manufacturers in 1993 in terms of investment amount, with improved profit from microprocessors and related products. In terms of sales also, Japanese manufacturing companies, whose one time 50% of the global market has been affected by the advancement of Korean companies, surrendered their leading position to US. manufacturers in 1993. In the semiconductor industry, it is said that the amount of investment has an impact on the market share several years later, and this trend presents a significant warning to Japanese manufacturing companies. Improved earnings and investment efficiency are urgently needed. On the other hand, major changes are also taking place worldwide with regard to the electronic equipment market, where semiconductors find their chief application. First of all, within Japan, there has been a loss of competitive edge within the electronic equipment market due to the high valuation of the yen, and there has been shifting overseas. This trend is especially evident in the consumer market. In addition, there have been stringent demands from abroad, calling for increased internal demand, opening of markets, correcting trade imbalances, and contribution to international efforts. Definite measures have not been adopted, and the future outlook is still not clear for Japan. Overseas, the United States, which experienced a recession earlier in the '80s, began taking strategic steps directed toward developing an information-based society, by downsizing its work forces. This led to a strong recovery from the "domestic hollowing out trend" which was at one time prevalent. Europe also has experienced a gradual recovery stimulated by the breakdown of the former Soviet block, and Asian countries continue to experience high growth, as equipment production shifts away from advanced countries. There also have been regional economical consolidations as evidenced by the EC unification, NAFTA, and AFTA. The global economy is continually groping for new structure, and for the time being consists of three elements-global, regional, and market economies. Amid these changes in the external environment, Japanese manufacturers are pursuing new approaches which are not simple extensions of conventional thought. Two examples of this are the ideas of improving product composition (not dependent on memory chips) and developing business ties with overseas manufacturing companies. Independent companies are taking clear steps in this direction. However, at the same time, there are also numerous problems, such as the trade problems, environmental problems, and intellectual property rights, which independent companies cannot handle alone. These problems are not likely to be easily resolved through efforts made by individual firms. Today, as the Japanese economy and Japanese manufacturing companies themselves face these major changes, the time has come where we must take a hard look at the prospects for the next century. [To bring this up to date, sales by Japanese semiconductor manufacturers in 1994 were US$44.4B, about 40.5 percent of the world total, and less than one percent under the US total (41.4%). World semiconductor sales were about US$110B, about 28% greater than in 1993. The closing gap between Japan and the US is due to the rapid increase in sales of DRAMs (memory chips), which were 60% above 1993 figures, and primarily manufactured by Japanese companies. However other Asian manufacturers, particularly Koreans such as Samsung also benefited from the DRAM sales increase; Asian semiconductor sales in 1994 rose 64%. Dataquest estimates that the market will grow at an average annual rate of 15% from 1995 and will exceed US$150B by 1997. The 1994 ranking of semiconductor makers is as follows. SALES INCREASE MARKET SHARE 1 Intel US$10.1B +27% 9.2% 2 NEC 7.9 29 7.2 3 Toshiba 7.5 31 6.9 4 Motorola 7.2 22 6.6 5 Hitachi 6.5 29 5.9 6 Texas Instruments 5.3 29 4.8 7 Samsung 4.9 61 4.5 8 Fujitsu 3.9 32 3.5 9 Mitsubishi 3.7 32 3.4 10 Philips 2.9 26 2.6 DKK ] --------------------------------- 2. Outlook for Electronic Equipment Production and Semiconductor Demand Although there have been short-term fluctuations, demand for semiconductors has increased steadily due to the increased production of electronic equipment and the increasing amount of semiconductor components used in each unit. In particular, development of electronic computers in the '70s and '80s has determined the course for an information-based society, and has been the largest factor associated with increased semiconductor demand. In Japan, the development of consumer devices has also contributed greatly to this demand. In the '90s, however, demand for semiconductors began to change significantly with regard to growth rate and content. That is, the breakdown of the bubble economy, the slowdown of internal demand, and economic shifts abroad caused by the high valuation of the yen, have resulted in a negative growth rate for 1992 and single-digit growth for 1993; and it appears that slow growth will inevitably continue for the time being. On the other hand, US. and Asian markets overseas achieved high growth during 1992-93, largely due to the driving force of the personal computer, with the growth of microprocessors being particularly high. This indicates a departure from the former type of growth which was based on memory chips. Future demand for semiconductors is predicted to be sluggish (about 10% annually), and will continue to focus on data processing and communications equipment directed toward achieving an advanced information-based society. The reasons for this are: * Advanced areas such as Japan, the United States, and Europe will enter a period of stable, but slow growth, and the shift toward production in Asian countries will continue. Therefore, there are no prospects for high growth of electronic equipment production in advanced areas. * Production of electronic equipment will continue to increase in Asia at an average annual growth rate of 10% up to the year 2000. * In Russia and Eastern Europe areas, the shift toward a market economy will continue to be difficult; and, up to the year 2010, the market can not be driven by electronic equipment. In addition, the nature of demand will change significantly in the future. For example: * While the ratio of semiconductors used per each electronic device will continue to increase in the future, the "system-on- silicon" trend associated with more highly integrated LSIs will advance significantly. * In conjunction with this trend, the time will come when the designer of electronic equipment will design the LSI, and semiconductor manufacturing companies will need to provide not only the LSI, but also software components and comprehensive design environments. --------------------------------- 3. Future Outlook for Semiconductor Technology In the 21st century, the intelligent data communications infrastructure. which is expected to have a large impact on the demand for electronic equipment and semiconductors, will need advanced systems and signal processing technology. These can be classified from various different viewpoints. The needs associated with ultimate demand for semiconductor products were classified as follows: Semiconductor product group: memories, processors, logic devices, linear devices, and other devices. Semiconductor technology elements: process device structures, assembly, design methods, test methods, circuit systems, commodity technology, production equipment, production systems, and other technologies. Equipment technology elements: communications processing systems, network systems, wireless/satellite communications systems, and image processing systems. The future needs directed toward major applications are shown in Table 1 below. Table 1. Future Outlook for Semiconductor Devices Memories Larger capacities associated with advanced information media (voice, still images, moving images, and 3- dimensional images) Application specific memories associated with diversification of media Non-volatile memories to replace external memory equipment (associated with trends toward more compact and portable equipment) Fast access memories for high-speed processing engines Incorporating memory functions into silicon, associated with the advancement of system-on-silicon Processors Fast processor engines associated with advanced information media Improved processing capability associated with more advanced and smaller communication terminals Application specific type engines associated with more diverse and smaller equipment Power management technology associated with lower power consumption devices Logic ICs Improved operational speed and increased gate numbers associated with more advanced information media Isolated applications associated with improved processor functions (such as operational speed, confidentiality, and peripheral functions) Advanced design environments for higher gate numbers (such as advanced CAD and micro cell) Linear ICs Limitation and specialization associated with the progress of signal processing digitalization (such as for high frequency transmission/receiving circuits). Faster and higher bit numbers for AD conversion Combined analog and digital associated with the advancement of system-on-silicon Efficient design methods and environment for mixed analog and digital circuits. Other Devices High-speed/high-bit number DSPs for increased digital signal processing; development and standardization of related DSP optimization software (operating systems, signal processing algorithms, etc.) Non-Neumann type processor engines associated with the increase of "fuzzy" data processing, recognition and judgment processing; also, new logic systems such as multiple value logic, and the devices needed for these systems. Various types of optical devices associated with the advancement of optical communications technology (terabit communication) High-speed optical exchange devices for ATM exchanges. Development of future technologies such as large scale three-dimensional optical integrated circuits. As shown in Table 1, future needs will be highly advanced and cover a large range. There are many needs which cannot be met easily through the efforts of individual companies alone. Upon evaluating these needs, it was determined that the research and development associated with these needs should be allocated in the following way: * University and public research organizations should be in charge of research and development for those needs which are either technically advanced or basic, but which are not yet clarified. * Joint government research and development organizations should be in charge of those needs which are technically advanced, basic, and of a follow-up nature, and which warrant technical standardization. (Follow-up nature means that Japanese manufacturers will follow suit, or that the manufacturers are not likely to take the leadership role.) For other needs not described above, Table 2 (below) shows the needs of individual enterprises or cooperative enterprises which are technology- related themes suitable for research and development by government research organizations. Table 2. Future Technology Themes Suitable for Joint Research and Development by Government and Private Sector Process-related 1. Basic processes for 4Gbit and later DRAMs themes 2. Advanced wiring technologies 3. Process simulators and design tools Themes pertaining to 4. Next-generation user programmable device device structures structures 5. Device simulators and device structure design tools Themes related to 6. Multichip modules assembly 7. Package design environment Themes concerning 8. Top-down design environment from the system level design and test methods 9. Next-generation functional languages 10. Mixed analog/digital LSI design methods 11. Test automation methods Product technology 12. Basic software for peripheral devices themes (such as operating systems for DSP) Production technology 13. Ultra-clean rooms themes 14. Production simulation technology Themes related to 15. Next-generation devices (devices and large-capacity and integrated circuits) high-speed communication In any case, the important thing in examining future technology themes is to clarify the direction in which Japanese manufacturing companies should head. In view of the current situation where LSI design technology has been added to sub miniature technology (which has been the nucleus of the semiconductor industry to date), there are two basic directions in which Japanese manufacturers should head. One is a continuation of the "unending pursuit of sub miniature fabrication technology", taking advantage of the excellent production technologies and large volume production capabilities. The other is to focus on advanced LSI design technology, the direction taken by US. manufacturing companies, to increase the weight of semiconductor products which are "design-rich" and have high added value. Since there are many factors involved in selecting the direction to pursue (including a "middle-of-the-road" direction), serious consideration is warranted. However, it is clear that we have reached a point where an extension of the traditional approach must be reconsidered, in view of the current situation (where the relative competitiveness of Japanese manufacturers has taken a downturn, where US. manufacturers are experiencing recovery, and where Korean manufacturing companies are entering the marketplace) and in view of the changes which are likely to take place regarding the future electronic equipment market and semiconductor needs. In particular, it is noteworthy that many of the themes suitable for joint research by government and the private sector are software related. As the necessity for LSI design capability increases, the need for software will naturally increase also. However, this is undeniably a difficult theme for Japanese manufacturing companies which have pursued sub miniature fabricating (hardware) technologies to date, and it applies also to the entire Japanese electronics industry. In retrospect, Japan has not cultivated the human resources needed to develop superior software. For this reason, there is an extremely small population capable of creating such software. What this means is that together with focusing on software related themes, there is a long-range problem of also developing software designers. --------------------------------- 4. Problems of the Semiconductor industry and Mid-Term Vision Table 3 (below) shows the "important problems" of the (Japanese) semiconductor industry as described above, and ways to resolve these problems. Table 3. Problems and Corrective Measures for the Japanese Semiconductor Industry Problem Corrective Measure Lower investment Optimize equipment investments (by drastically efficiency & less cutting down the amount through the introduction profit of new concepts, etc.); lower costs; shift to higher value-added "design-rich" products. High valuation of Reinforce competitiveness with more advanced the yen and electronic equipment; create new Japanese markets emptying of the (advanced information-based society) domestic electronic equipment industry Engineering Train younger engineers (hiring, testing, treatment shortage (in systems, work environment, etc.); shift to particular, creative education systems which encourage independence, personnel and (elementary and junior high schools, technical system designers) schools, and internal corporate education); seek personnel who have an international scope (exchange students, foreign students, etc.) Continued trade Establish clear vision and international leadership problems capability for Japanese industry (through global contribution, etc.); shift more toward joint ventures and industrial co-ops Excessive Shift from a "horizontal line-up" approach competitiveness toward individual thinking and mutual interaction. Environmental Conserve energy, prevent global contamination problems and disturbance, etc. Intellectual Communicate continuously between industries, property rights using WIPO and GATT, assure appropriate protection and operation. It is only natural that Japanese manufacturing companies will take up these problems individually; but now more than ever before, it is important to have a mid-term vision which takes a hard look at the next century, to be aware that the semiconductor industry is at a turning point, and to regard Japan in its position relative to other countries worldwide. From this point of view, the mid-term vision which the Japanese semiconductor industry should have, is as follows. Opening New Markets For the semiconductor industry, which is expected to experience sluggish market growth, the "creation of a high value-added market for the next century" is a matter of urgency worldwide. In particular for Japan, which lacks an abundance of natural resources, to shift from an export- dependent country to one based on internal demand, the most important thing is to make the change to an advanced information-based society quickly. The semiconductor industry is key to achieving this. Of course, this does not mean that the semiconductor industry alone will be able to develop this enormous market. In order to do achieve this goal, it is also necessary to develop a society-related framework and an awareness of the technology revolution. Once this is accomplished, Japanese manufacturing companies, which rank at the top level worldwide, can be expected to lead in this area with confidence and responsibility. Also, for potential markets such as Asia, Japan should provide active support (personnel, technology, and capital) and leadership geared toward opening these new markets in the next century. On the other hand, there are negative effects that may be associated with a sudden technology revolution, and these effects must also be dealt with appropriately. For example, the effects of data-related crimes, changes in the work environment, employment fluidity, changes in social systems, and changes in personal lifestyles should be considered. In order to assure that no ill effects are brought about by the technology revolution, and to achieve an appropriate balance between the technology revolution and social revolution, it is important to always think in terms of "optimization of a semiconductor technology revolution". New Contributions Although it is certain that Japanese manufacturing companies and industries must address the problems at hand, the "worldwide contribution" must also not be forgotten. Looking back, Japanese manufacturers learned their technology from the "Silicon Valley" in the United States, and are now ranked at the top worldwide. However, the semiconductor industry is experiencing numerous problems on a global basis, and has reached a turning point. The world expects Japanese manufacturers and industries to tackle these problems directly, and to establish the direction of the next century; doing so would assure Japan's position in the global community. While Table 2 shows many of the problems being faced, the following discussion covers examples related to "worldwide contribution". * Support for Basic Research of Cutting Edge Technologies Criticism such as "sub miniature fabrication will not be the source of semiconductor advancement" began to be heard in the 1990's. In reality, this type of opinion arises from the simple logic which holds that sub miniature fabrication equals higher density memories, and that the shift toward higher density memories exceeds the associated demand. However, sub miniature fabrication technology is not associated with the development of higher density memories alone. It is also essential to achieving a "large-scale system-on-silicon" in the future, and advancement of sub miniature fabrication and higher density levels is needed. However, there is a big problem associated with "the future of sub miniature fabrication" in today's semiconductor industry on a worldwide basis. It is more of an "economical problem" than a "technological problem". That is, although there is a bright outlook for the advancement of sub miniature fabrication technology, the economical outlook for mass production is not good. Table 3 expresses this problem as "drop in investment efficiency". This problem must be quickly resolved by somebody. But, who should (or is capable of) doing this? The answer to this should be clear. The ones who have received the most benefits by incorporating advanced sub miniature fabrication technology into memories, in other words, the Japanese manufacturing companies, should be responsible for this. The Japanese manufacturers, by breaking through the problems on a global basis, will contribute not only to the advancement of semiconductors worldwide, but will also secure a global leadership position in the next century, as the backbone of sub miniature fabrication advancement. However it will be difficult to resolve this problem using the conventional approach which has been used in the past. This is because individual companies are already suffering from the increased cost of research and development and the lack of qualified personnel, and there is no favorable outlook for a change in these circumstances. For these reasons, I would like to propose that facilities be established for the "International Improvement of Efficiency of Research and Development". The experience gained through promotion of sub miniature fabrication techniques, and the capabilities of related industries such as production equipment manufacturing, have been the strong points of Japanese manufacturing companies for some time. On the other hand, US. manufacturers have capabilities associated with system design, software, and Design Automation. For both US. and Japanese companies to adhere to their current positions and think only of pursuing the strong points of each other would have a negative impact on the worldwide advancement of semiconductors. It would be preferable for those excelling in a particular area to further enhance those capabilities, and then to implement them worldwide in an appropriate manner. Therefore, I would like to propose, as a facility which would make use of the strong points of Japanese manufacturing companies on for global basis, the construction of a "Worldwide Research Center for the Sub miniature Fabrication and High Density (low-cost) Technologies Needed for the Beginning of the 21st Century" in Japan. If this research center were to be managed as an international organization where overseas researchers would be welcome, and the results of the research were to be protected and managed based on international regulations, this would provide an international contribution toward the advancement of semiconductors. If this type of international organization were to function well, it could also be beneficial in training qualified personnel and implementing technologies. Inasmuch as the semiconductor industry holds the position of being a competitive base industry in the next century worldwide, international cooperation of cutting-edge technology is not likely to be so easily achieved. The advantages and disadvantages, and the survival of individual companies worldwide is of a complex nature, and opposition (trade problems) could become even more intense. However, the short- sighted disputes surrounding the competitive base industry of the next century should not continue forever. There is little to be gained from both sides from this type of opposition, and it will have a negative impact on the progress of the industry. Fortunately, the chance for globalization and international cooperation is increasing on a worldwide basis, and it is good that international ties are being made between individual companies. The Japanese industry should definitely move toward promotion of international cooperation based on these actions, and it is my sincere hope that Japan will be the worldwide leader because of its convictions and sense of responsibility. --------------------------------- 5. Addressing Long-Term Problems As I have touched upon the current status, future outlook, and numerous problems associated with the semiconductor industry, it is also necessary, for the structure of the Japanese industry to change significantly, geared toward a future advanced information-based society. Although the role to be played by semiconductors in conjunction with this is becoming increasingly important, the environment surrounding Japan's semiconductor industry is also becoming harsher, and the number of problems which cannot be resolved by individual companies alone is increasing. Based on these considerations and this awareness, and together with the activities of this mid-term vision committee, there has been increasing call for establishment of the "Semiconductor Industry Research Institute" (a think tank for the Japanese semiconductor industry) as an organization to develop a course of action, in order to energize the Japanese semiconductor industry and to challenge the many possibilities which can be achieved through semiconductors. [Note: this organization was established April 28, 1994, see below for more details, DKK.] This research center approaches the problems discussed above from a long- term and strategic point of view, and its chief mission is to provide the research results to industry and society. Therefore, its activities are expected to encompass not only the industrial world, but will also call for cooperation from the government and academia. The programs being dealt with at the research center can be basically divided into four groups-promotion of technical advancement, contribution to society, energization of the semiconductor industry, and global- related programs. These four programs will be discussed below. A. Program for the Promotion of Technical Advancement First, it is necessary to classify and evaluate each of the themes described in the "Outlook for Semiconductor Technology", and to develop a long-range plan for the technical development of the semiconductor industry. (This includes materials, process technology, design technology, device technology, production equipment, and inspection equipment.) Then, we can establish long-term and advanced technical objectives. A strategic initiative which considers a cooperative system between industry, government, and academia would be desirable from a global point of view. In conjunction with this, an initiative pertaining to the "training of personnel capable of bringing about a creativity-based technology revolution" can also be expected, based on a generation in which product design capability will be emphasized. For example, "reconsideration of the education system", or "cooperation between industry and academia in the training of personnel" might be considered. Another possibility is to seek personnel from abroad. It is also necessary to consider further reinforcing the research and development system. Among other possibilities, research could be assigned to universities or public research organizations, the creation of specialized research organizations could be encouraged, or joint industry and academic research could be promoted, depending on the research theme at hand. B. Program for Contribution to Society With the end of the cold war, the world has undergone sudden changes, and the semiconductor industry can no longer be thought of as belonging to any particular country. In particular, even though Japan is regarded as an "economic haven" it is sometimes perceived from a global point of view as irresponsible or a "special type" of country, while within Japan there are serious problems such as economic emptying, the aging of the population, and a sharp decrease in the younger population. Under such circumstances, in what ways should the semiconductor industry contribute to society, being the "strategic base industry for the 21st century"? The first contribution to come to mind is "enhancing the lives within the country". This would stimulate internal demand and at the same time be an effective way to correct Japan's trade imbalance. Some specific ways of doing this might be supporting and reinforcing the activities of the domestic electronics industry, dealing with the aging population, and achieving a "comfortable" society. One effective method to achieve an advanced information-based society is linked to the creation of a new high value-added market. In doing so, electronic equipment manufacturers and semiconductor manufacturers should collaborate to more effectively promote this approach. Also, on an international basis, supporting potential markets such as Asia with personnel, technology, and capital, and making positive contributions toward global environmental problems (in terms of technological development) can also be expected. C. Semiconductor Industry Revitalization Program For the industry, which is suffering from sluggish market growth and reduced investment efficiency and profit, "drastically reducing industrial costs", together with creating new internal demand are important means of revitalizing the industry. In particular, with regard to the costs associated with research and development, equipment, and capital procurement (which have much room for scrutinizing), initiatives should be developed which analyze the actual conditions, compare the international competition, and identify problems, together with drastic reduction of costs. Since a tremendous amount of funding is needed to cover research and development costs and for equipment investment, for the semiconductor industry, which has a large ripple effect on other industries, tax incentives which provide support in the international arena, should also be examined and proposed. D. International Programs Although it has already been said many times, the semiconductor industry requires international cooperation, but achieving an appropriate level of competitiveness and effective international cooperation amid a continuing environment of cut-throat competition, is not so easily accomplished. However, this is something which must be achieved above all else. for the base industry of the next century. At least, this industry should not follow the history experienced by other unfortunate industries. The first and foremost element is "to develop means of exchange with other countries". These exchanges can be roughly classified into two groups: those involving advanced countries, and those with middle and developing countries. In both cases, the exchange should be earnest and continuous, and should involve the government and industry of the partner country. The Research Center described above could provide a means of achieving this. In addition, one way of helping to eliminate friction is to call for an "investigation of international demand balance" and a "world semiconductor conference". This would also prevent any further worsening of the semiconductor market and cultivate exchange. Next, an initiative which is geared toward the establishment of international unification rules is needed to facilitate international exchange. In particular, the rules pertaining to international disputes which involve claims of dumping and violation of intellectual property rights need to be clarified. While some rules have already been established, such as GATT and WIPO, they are not always interpreted the same way by different countries. However, for widespread international exchange to take place in the future, it is essential that each country establish common rules. One possibility might be for the research center to address the establishment of an "international semiconductor standard cost computation method" or an "international semiconductor organization". There are also many problems which should be approached from a unified rule point of view. These include intellectual property rights, country of origin, and standardization. Last of all, with regard to the complex and continuing trade friction issue, it has become necessary for the semiconductor industry itself to examine a "comprehensive trade policy". Japan's industrial sector sometimes tends to take a passive position, such as depending on the government to solve the problems. However, the US SIA (Semiconductor Industry Association) is a dynamic organization which takes advantage of the Congress, the government, and mass communication facilities to protect businesses, the industrial sector, and in turn assure the national safety. Korea has also recently formed the KSIA and has begun to expand its operations from a national point of view. [The implication is that Japan should be doing the same. DKK] By studying and initiating a "comprehensive trade policy", the research center will not only be supporting the economic growth of Japan, it is urgently needed also from the view point of revitalizing Japanese technology and assuring economic safety. As a participant in this wonderful industry, it is my sincere hope that this research center overcomes the immediate difficulties it is facing, and becomes a forerunner to open the 21st century, which is full of hope and expectations. ---------- ----------------------------------------------------------------------------- (2) SEMICONDUCTOR INDUSTRY RESEARCH INSTITUTE JAPAN (SIRI) Semiconductor Industry Research Institute Japan (SIRI) (Handotai Sangyo Kenkyusho) Fukoku Seimei Building, 23F 2-2-2 Uchisaiwai-cho, Chiyoda-ku, Tokyo 100 Japan Tel: +81 3 3593-7243; 3211-2765 Fax: +81 3 3593-7250 (Mr. Okabe) This was founded 28 April 1994 with ten initial corporate members. Fujitsu Limited Hitachi, Ltd. Matsushita Electronics Corporation Mitsubishi Electric Corporation NEC Corporation Oki Electric Industry Co., Ltd. Sanyo Electric Co., Ltd. Sharp Corporation Sony Corporation Toshiba Corporation SIRI is formed with four main business purposes. (1) Research for the promotion and development of semiconductor technology Research on long-term technological development programs Development of human resource leading to creative technological innovation Research for the reinforcement of R&D systems at universities and public research institutes (2) Research on the social contribution of the semiconductor industry Proposals for infrastructural improvement leading to the elevation of lifestyles Proposals for the creation and stimulation of new demand (Progress in advanced telecommunications and potential applications of semiconductor technology) Taking the lead in resolving environmental issues (3) Research for the revitalization of the semiconductor industry Research on taxation systems Proposals and analysis of industrial costs (4) Research on international cooperation in the semiconductor industry International cooperation, technological exchanges, (exchanges with other countries; relevant proposals) Proposals for promoting international rules and standards; guaranteed intellectual property rights and establishment of proper administrative procedures Research on trade policies Prospectus: It is not too much to say that almost all major changes which we have witnessed since the 1960s have been derived from great progress in semiconductor technology. Social progress we anticipate in the near future will also depend on the further development of semiconductor technology. It follows that the semiconductor industry constitutes the most important foundation for national development as well as for society at large. By the same token, every one of us, who engaged in the semiconductor business, must assume a great deal of social responsibility and obligation. Unfortunately, however, the vital roles being played by the semiconductor industry are not fully recognized by the general public, and members of industrial circles, as well, do not seem to have a middle and long-term vision for the future direction of the industry. On top of that, the present situation surrounding the Japanese semiconductor industry is not totally favorable, in particular the lingering economic recession and decreasing competitiveness due to the rapid appreciation of the yen. Our recent experience seems to suggest that the Japanese semiconductor industry, which has enjoyed steady growth without much trouble, is now at a turning point. In order to accommodate these changes, we believe that we need a clear vision for the future and proper procedures for the revitalization of the Japanese semiconductor industry which mobilizes all its potential capabilities. Of course, each company will strive to achieve these goals, but it is equally important that a middle- and long-range program be proposed as an industry-wide initiative. This program should encompass a broad variety of tasks common to the industry, including new technological options, promotion of technological innovations, development of creative personnel, infrastructural development to stimulate new demands, ideal approaches to international cooperation, etc. A long-range vision is required to develop such programs which are independent of short-term factors such as economic fluctuations, whereas in order to fully implement these programs, we must have the ability to influence all concerned and execute them with resolution. This is a challenging task which can only be carried out with tripartite cooperation among industry, government, and academic circles. Moreover, in order to maximize the effectiveness of such cooperation, an independent organization is required to be established, where experts widely representing private, government, and academic sectors will have opportunities to interact dynamically with one another. The nucleus of this venture is the proposed "Semiconductor Industry Research Institute Japan," a center of excellence consisting, of corporate members, government officials, and academicians. It will serve as a "think tank" for the Japanese semiconductor industry, analyzing the overall industrial environment, formulating strategies, drafting industrial policies, etc. Furthermore, as a public relations center, it will function as an information clearinghouse for interested parties both in Japan and abroad. ------------------------------------------------------------------- (3) IMPACT OF EARTHQUAKE ON SEMICONDUCTOR ACTIVITIES Several people have asked about the earthquake. Concerning semiconductor manufacturers, the most damage was at a Mitsubishi research facility which includes a small scale fab used for R&D and pilot production. It is not operating and there was no time estimate about its resumption of operation. Plants of the joint TI/Kobe Steel project (KTI), as well as plants of Toshiba, Ricoh, and Unison (a diode maker) all received some damage but have resumed operation. The factories of Matsushita, Rohm, and Sharp in Kansai (near Kyoto) had essentially no damage. Concerning LCD factories, Sharp had no damage, the IBM/Toshiba (DTI) joint venture had only minor damage, but Hosiden had more severe damage. Sharp and DTI are operating normally, but Hosiden began operating on 23 Jan. at 30% output. For materials suppliers. Sumitomo Sitix (silicon crystal). Damage was very light, but operations were delayed until 23 Jan. because of water problems. This plant produces 5% of the world supply of 8 inch crystals plus smaller amounts of 4-6 inch crystals. There is still loss of production due to after shocks. Sumitomo Denko (gallium arsenide). This plant was severely damaged with estimates that production cannot be restored until the end of March, but damage assessment is not complete. This plant produces 30% of the world supply of the GaAs used in high frequency devices for telecom and military applications, and 50% of a special grade of GaAs used in a variety of Japanese industry. Osaka Gas (special gasses). Only minor damage, and operations began 18 Jan. Mitsubishi Materials & Shinetsu (silicon & slices). Reported no problems except for some product on the line during the earthquake. These plants are quite far from Kobe. Most electronic end-user plants are in Osaka or Kyoto areas, outside of the zone of severe damage. There have been no reported problems at major consumer product factories. However, Matsushita's information systems plant in Kobe had severe damage. The port of Kobe is closed. This port handles 8-12% of Japan's imports and exports. However, news reports indicate that Yokohama and other ports are anxious to try and take up the slack.
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