By Yutaka Kobayashi, Chief Researcher, Life Science

(The original article in Japanese was posted inApril 2022)

 

In February 2022, the Semiconductor Industry Association (SIA) announced that the global semiconductor industry sales grew by 26.2% on a YoY to US$555.9 billion (approx. 64.3 trillion yen). It was the first time for the annual sales to exceed US$500 billion. The sales are expected to increase further in 2022 to outstrip US$600 billion. Semiconductors have been extensively used, not only for electronic devices including PCs and smartphones, but also for home appliances, automobiles, etc. They are expected to be in high demand in ongoing development projects such as 5G infrastructure, smart cities, data centers, robotics, and EVs, and continue to be indispensable in the era of digital transformation (DX).

Until around 1990 to 2000, the semiconductors in Japan had built thriving business involving mainly general electric manufacturers in the nation. After 2010, the global market share by semiconductor manufacturer completely shifted to overseas companies, namely Intel and Samsung. In recent years, foundries, the companies that provide semiconductor manufacturing services, have seized power in the industry. TSMC, the largest foundry, has become one of the leading companies in the world, with its overwhelming presence in the size of capital investment, etc.

METI expressed the importance of semiconductors as, “Semiconductors are vital as a strategic technology that directly links to economic security and digital infrastructure to support digital society.” From the economic security viewpoint, the ministry showed its intention to take the initiative for newly building and renovating semiconductor factories after determining the semiconductor categories needed to be organized as a nation. The government endeavored to induce TSMC to build a factory in Japan, which took shape as a launch of a semiconductor plant in Kumamoto planned to start its operation at the end of 2024. Many companies including TSMC of Taiwan, Sony group, Denso, etc. decided to invest in the plant operating company, thereby to contributing in stabilizing the domestic supply chain and in training of semiconductor manufacturing engineers. 

While the semiconductor industry in Japan are said to be in a critical situation or in a downfall, Japanese companies are recognized as superior in semiconductor manufacturing equipment and component materials, represented by Tokyo Electron in manufacturing equipment, Shin-Etsu Chemical in wafer, and JSR Corporation in the photoresist field. The wisdom has been concentrated from many other Japanese companies into semiconductor components and in the manufacturing processes, generating market competition not revealed upfront. Despite inferiority among final product brands, the way to compete behind the scenes based on the elemental technologies is understandable as proper value generation.   

Similar cases are observed in bio medicines, vaccines, etc. in the life science field, i.e. CDMO (Contract Development and Manufacturing Organization), the business to develop and manufacture bio medicines for other companies. They accept orders from pharmaceutical manufacturers for producing good-quality APIs (active pharmaceutical ingredients). Together with plant engineering knowledge, preciseness in cultivation, separation, and refinement of cellular materials is required. Such CDMO applies to FUJIFILM Corporation, AGC Inc., etc., strategically developing business in global markets. Many other Japanese medical companies have announced the market entry and have started showing their performance in contract manufacturing such as for active ingredients for Covid vaccines. CDMO companies stick to be behind the scenes without becoming final brands of medicines. They are often called “bio foundries” in contrast with semiconductor foundries. In the future, they can grow to be TCMO of the bio medicine industry.

Precision technologies related to manufacturing processes of value-added products such as semiconductors and bio medicines are profound, and are strong area for Japanese companies. It seems that the down-to-earth positioning for many of them is to keep competitive edge in global industries in peripheral processes, parts, and components without persisting to platforms and promising final products. In the clinical trial industry, the target area for the research that I take charge, global companies such as Roche, Abbot, and Siemens Clinical Laboratory (SCL) tend to dominate as clinical platformers. Japanese clinical reagent or equipment companies are increasingly enhancing to supply OEM for such clinical trial giants.

Many people may have known the companies such as Tokyo Electron and AGC from impactful TV commercials. Regardless of the awareness of company names, it is important to broaden the interest in the degree of competitiveness these companies develop business in global markets. It is time for the Japanese government to prepare for good and logical response to the question of what the core industry in our country for the future.