Sayonara

“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.

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.


Comments

13 comments

  1. Renesas is managed like the EU, no clear leadership around.

  2. Thanks Sevilla. I assume the strategy doesn’t rule out buying the equipment out of a fab and re-locating it to Taiwan.

  3. TSMC’s strategy is to focus their manufacturing capabilities in Taiwan.
    Rumors are rumors…

  4. Yes, Robert, Renesas has always seemed so late to every node and so conservative in its product planning. Maybe that’s OK when a third of your business is in automotive,but it’s death everywhere else

  5. Renesas, is caught been a rock and a hard place, seem doomed whatever they do, so they’re choosing to die slowly and maybe with the passage of time they’ll find an alternative.
    It’s like you’ve said before, you can only hope to win in the semi industry if you are willing to “bet the farm” on each round. Unfortunately (maybe fortunately) it takes a really skilled (and lucky) team to stop one of those bets from blowing-up. BUT it does appear to be the only way to operate, if you aspire to be (remain) a top 10 player.

  6. Yes indeed Robert, Malcolm Penn says it all: “Another small step towards global domination for TSMC, a giant leap into oblivion for Renesas and Japan semiconductors Inc … total madness”

  7. Another one bites the dust….
    Seems to me that all the survivors, can be purchased by TSMC from their petty cash drawer. Give it another couple of rounds and they wont even need to open the drawer, pocket change will do the job….
    Scary

  8. Sadly I think you’re not the only user who will think like that, Dr Bob. I’ve heard Renesas say that the USP for customers of their automotive products is that they fab them themselves. Especially after the ST ECU supply cock-up which brought six Nissan car factories to a juddering halt. Sounds as if the bean-counters have taken over at the expense of the long-term viability of the business.

  9. As one who designs in these sorts of devices it is yet another company to avoid!

  10. OMG, Mike, Yes you’re probably right.

  11. I think they might, cheese, after all they bought P A Semi to get design. They didn’t go to 28nm for iPad 3 for fear of lack of supply. They must have at least talked about it. And Yes I’m sorry to mention Morita and Miyamoto in the context of fab. I could have mentioned creative thinking semi people in this context but few people would know who they are and they probably wouldn’t thank me for doing so. I think we all know who should be put in charge of Renesas but it would embarrass him if I said so.

  12. Wrong title David. It should be Seppuku.

  13. On a lighter note : The grown up Japanese (as you define them) would make great bankers (while the ones on wall street are / would make great gamblers, and so the wall street should shift base further west ..to Las Vegas, where the rich Japs can come over for weekends of gambling and fun)
    On a darker note : Why mention Morita and Miyamoto in an article on fabs and investment ? Product / Consumer Creativity and ownership of industrial production are as similar as cheese and chalk. And as regards fabs/production etc, few people/places could compete with the Chinese/Taiwanese. For some reason, the world (and surely the creative people) have not deemed chips to be sexy – only the end products with those chips thrown in could claim any amount of sexiness. So I doubt that even if Morita were to decide on fab investments, the decision would have been any different.
    The other way to look at it is: Given the staggering pile of cash that Apple is sitting on, given their love-hate relationship with Samsung, given that they are now headed by the erstwhile-COO – in short, given all favorable conditions, would they ever fab?

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