Today Renesas announces it is setting out on the fab-lite route, selling a Japan-based fab to TSMC, going to TSMC for 40nm and better processes and laying off up to a quarter of its workforce. It’s a sorry state to be in.
“Another small step towards global domination for TSMC, a giant leap into oblivion for Renesas and Japan semiconductors Inc … total madness,” comments Malcolm Penn, CEO of Future Horizons.
The state of Renesas, Elpida, Panasonic and Fujitsu, which have no other strategy than merging, raising more capital, going fabless and, in Elpida’s case, going bankrupt, was not inevitable.
Seven years ago, the Japanese semiconductor industry was thrown a lifeline.
“It’s the last chance of the Japanese government to restructure the electronics industry in Japan and reinvigorate the top companies,” said Jean-Philippe Dauvin, then vp and chief economist of STMicroelectronics.
The Japanese semiconductor industry rejected the lifeline and its future.
The lifeline was a proposal by MITI to set up a joint foundry. A company, called the Advanced Process Semiconductor Foundry Planning Company, was set up to implement the plan.
In 2006, the CEO of the company, NEC’s Hirokazu Hashimoto, told me: “Japan has 11 integrated device manufacturers at the moment but their fab capacity is not big and they can’t compete with TSMC which has 60,000 wafer-per-month fabs.”
Hashimoto’s plan was to raise an initial $1 billion for a 10,000 wafer-per-month fab and then another $5 billion to extend it to 60,000 wafers-per-month.
The Japanese government was right behind the plan.
The first implementation of the plan called for a 65nm fab to be built. However the companies said they had had settled their 65nm processes and design rules, and could not see a way in which variants of a 65nm processes could be effectively run in one fab
So a second implementation was proposed – that a 45nm fab should be built. Fujitsu, Renesas, NEC and Toshiba set out to define a standard process technology for 45nm and defining a standard to allow them easier access to each others’ IP. Agreement, said the companies: ” Will promote cross-use of IP and libraries, improve fab operating rates and facilitate large-scale capital investments among the companies.”
Agreement wasn’t reached. The last best chance was lost.
Toshiba went off on its own merry way and implemented a true semiconductor strategy – big bets, bold, hairy and successful.
And the other companies went into a huddle of consolidation and a spiral of decline.
When Renesas was formed in 2003 it was the world’s No.2 semiconductor company.
It sank to No.7 before joining up with NEC in 2009 when the combination became the world’s No.3 semiconductor company.
Two years later, in 2011, Renesas was the world’s No.5 semiconductor company.
Renesas top execs have never been able to formulate a growth strategy.
Back in the 80s, when Japan reigned supreme in the semiconductor industry, the growth strategy had been set by the Americans: – denser, faster, cheaper, lower-power memories and big bold bets on fab.
The game changed, but the Japanese semiconductor industry never devised its own growth strategy.
It is said that the Japanese invest in what worked last time.
As Robert Cringely pointed out in his incomparable Accidental Empires, in some ways the Japanese are too grown up for the high technology industry. They are logical, reasonable, consensual and sensible when what is needed for success is flair, creative non-conformity and vision.
These qualities are as prevalent in Japan as elsewhere but their industrial system does not encourage them.
The brilliant Akio Morita and Wii inventor Shigeru Miyamoto had them in abundance and got the chance to use them, but the outstanding individualist is rarely found at the top of Japanese industry.