The Possibility of Japanese Economic Revival Considered from Japan-US and US-China Semiconductor Frictions

It is not widely known, but semiconductors are a critical core technology in the digital society and global economy.

Semiconductors have a wide range of applications, from consumer goods like smartphones and PCs to AI, cloud computing, and even the military and defense sectors, and the interests of various countries are intricately intertwined over their technological superiority. This article examines the background and impact of the Japan-US semiconductor friction that intensified in the late 1980s and the US-China semiconductor friction that has emerged in recent years, as well as Japan's position.

Power and Water Issues in the Semiconductor Industry and the Potential of Africa

The semiconductor industry requires large amounts of electricity and water. Although Japan possesses some of the world's leading water treatment technologies and efficient water recycling systems, the high cost of power generation is a major challenge. On the other hand, in some African countries, solar power generation costs are overwhelmingly low at around 1 yen/kWh, and even when combined with batteries, it is possible to supply power more cheaply and stably than industrial power sources in Japan.

Given this situation, the economic rationality of attracting Taiwanese semiconductor manufacturers to Japan must be carefully considered. Rather, a strategy in which Japanese companies, which possess some of the world's leading semiconductor manufacturing equipment, expand into Africa, where renewable energy is abundant, and aim to establish 'renewable energy industrial parks' may be a more promising option from a long-term perspective.

Strengths of Japanese Companies: Manufacturing Equipment and Material Technology

To manufacture cutting-edge CPUs and GPUs, advanced semiconductor manufacturing equipment and materials are essential. And Japanese companies play an indispensable role in the global supply chain in this field. Below are some Japanese companies that deserve particular attention.

Tokyo Electron:A major manufacturer that provides a variety of semiconductor manufacturing equipment such as etching systems and coater/developers, supplying equipment essential for state-of-the-art manufacturing processes.

DISCO:Possesses world-class technology in dicing saws and grinders, enabling precision cutting and grinding of silicon wafers, and realizing high-precision chip manufacturing.

Shin-Etsu Chemical:As a chemical manufacturer boasting the world's top share in silicon wafers, it supports cutting-edge semiconductor manufacturing through the provision of high-quality wafers.

Lasertec:Has established a monopoly position in EUV mask blank inspection equipment, enabling defect inspection in state-of-the-art lithography processes.

SUMCO:Specializes in the manufacture of silicon wafers, and while accounting for a large portion of the global market along with Shin-Etsu Chemical, it supplies high-purity wafers and supports the manufacture of advanced CPUs and GPUs.

Tokyo Ohka Kogyo:Has a global share in the manufacture of photoresists, provides products compatible with EUV lithography, and supports microfabrication technology.

Advantest:As a global leader in the field of semiconductor testing equipment, it provides equipment necessary for performance testing and evaluation of CPUs and GPUs, supporting semiconductor quality assurance.

Ibiden:Through the manufacture of high-performance semiconductor package substrates, it realizes high-density mounting of CPUs and GPUs, contributing significantly to performance improvement.

ULVAC:Deploys semiconductor manufacturing equipment and material process equipment centered on vacuum technology globally, providing essential technology for state-of-the-art processes such as film deposition and etching.

Economic Rationality of Expansion into Africa

Unlike agricultural products or natural resources, semiconductors have a very high unit price per weight, so the impact of logistics costs via air freight on total manufacturing costs is limited. Also, because semiconductor manufacturing is highly automated and is an equipment industry, unlike conventional industrial production, the need for highly skilled workers is reduced. Furthermore, by ensuring sufficient replacement parts and maintenance parts locally, stable operation becomes possible.

Even if initial equipment installation costs were three times higher, the impact on long-term manufacturing costs would be minimized when considering reductions in power and water treatment costs, as well as the environmental value of renewable energy. Rather, Africa, which can utilize inexpensive renewable energy, can be said to be the optimal location for Japan's semiconductor industry to demonstrate its competitiveness.

1. Historical Background and Impact of Japan-US Semiconductor Friction

(1) US Anxiety in the 1980s
From the late 1970s to the 1980s, Japan expanded its global market share in fields such as DRAM (Dynamic Random Access Memory) against the backdrop of high technical capabilities and mass production capacity. On the other hand, US companies were at a disadvantage in terms of cost competitiveness, and Japanese semiconductors came to account for a large proportion of the domestic market as well. In response, the US government and industry accused Japanese companies of 'dumping,' and calls for protectionist trade measures grew.

(2) Pressure on the Japanese Government and Industry
The Japan-US Semiconductor Agreement concluded in 1986 demanded restrictions on Japanese exports to the US and further opening of the domestic market. The Japanese side struggled to balance the protection of its own semiconductor industry with the demands of the US, but ultimately, under strong pressure from the US, it accepted measures such as expanding the share of foreign products in the Japanese market and price correction measures. As a result, some Japanese companies were forced to change their management strategies, which led to the subsequent restructuring of the semiconductor industry and expansion into other fields.

(3) Subsequent Transition of Japanese Companies
Following the Japan-US friction, although Japanese manufacturers maintained their technological development capabilities, competition intensified from the late 1990s due to factors such as the rise of South Korean and Taiwanese companies and the strengthening of design capabilities in Silicon Valley. As a result, although the Japanese semiconductor industry still maintains a presence in some fields, it is far from the situation where it dominated the global market as it once did.

2. Composition of Current China-Japan Semiconductor Friction

(1) Rapidly Growing Chinese Semiconductor Industry
China has promoted policies to increase the domestic production ratio of semiconductors, leveraging the 'Made in China 2025' strategy and large-scale government subsidies. It aims to establish an integrated supply chain from design (fabless) to manufacturing (foundry) and testing/packaging, and its investment scale is unparalleled in the world. Especially against the backdrop of expanding demand in the digital economy sector, Chinese companies are accelerating the development of their own semiconductors.

(2) US Export Controls and Japan's Response
From the perspective that advanced semiconductor technology is a matter of utmost national security, the United States is strengthening export controls on advanced equipment and technology to China. Under pressure from this, the Netherlands and Japan are also tightening export controls on cutting-edge lithography equipment and the like. In 2023, the Japanese government announced the 'strengthening of export controls on advanced semiconductor manufacturing equipment,' indicating a policy to restrict direct exports to China.

(3) Impact on Japanese Companies and Challenges
For Japanese companies with strong global competitiveness in the fields of advanced semiconductor manufacturing equipment and materials, export restrictions to China could lead to a short-term decline in sales. However, if they do not comply with the rules shared with the United States, they risk not only damaging their credibility in the US market but also facing sanctions. Japanese companies need to carefully assess geopolitical risks while planning to restructure their research and development and supply networks.

3. The Essence of the TRON and Huawei Issues

(1) Lessons from TRON
In the 1980s, the real-time OS 'TRON' developed by Japan boasted high technical capabilities and versatility, but its widespread adoption was hindered by pressure from the United States. From the perspective of national security and market monopoly, the US was wary of Japanese advanced technology becoming a global standard and repeatedly engaged in various forms of obstruction. What was fatal for TRON was its designation as a target of Section 301 of the Trade Act by the United States Trade Representative (USTR) as a trade barrier.

However, the fact that this was not based on any facts at all is explained by Dr. Ken Sakamura, who launched the TRON project, in the following YouTube video by Yoichi Ochiai.

As the project leader of TRON, Dr. Sakamura brought together 13 major electrical, semiconductor, and computer manufacturing companies, including Hitachi, Toshiba, NEC, and Fujitsu. In other words, the TRON project was an important Japanese project that led not only the Japanese semiconductor and computer industry but also the global computer industry.

Before reading the following article by Captain Canna, I misunderstood Yoichi Ochiai as just a 'popular YouTuber'.

However, I was very surprised to learn that Dr. Ken Sakamura actually served as the co-examiner for Dr. Yoichi Ochiai's doctoral thesis, 'Graphics Representation by Computational Acoustic Fields.' It is subtle for me to know whether it is appropriate to call Yoichi Ochiai 'Ochiai-kun,' 'Ochiai-san,' 'Dr. Ochiai,' 'Mr. Ochiai,' or 'Professor Ochiai' from now on. By the way, I was a major developer of TRON by the time Ochiai-kun was old enough to understand things.

In the YouTube program, Dr. Ken Sakamura looked annoyed and, without mentioning any names, said 'Don't remind me, hey, geez!' and even though Ochiai-kun retorted, 'I wanted to hear that from Dr. Sakamura's own mouth,' the name of the person who pulled strings in America to plot the destruction of TRON was not mentioned.

However, the person whose name is infuriating just to speak is actually Masayoshi Son, and this is common knowledge in the Japanese computer industry. Conversely, anyone who does not know the fact that Masayoshi Son destroyed the Japanese semiconductor industry is considered ignorant or unknowledgeable in the computer industry.

Masayoshi Son colluded with the United States, fabricated non-existent trade barriers, and used American 'gaiatsu' (foreign pressure) to drive the Japanese semiconductor industry to ruin. This is a widely recognized fact in the information industry. If it were not for the sabotage by Masayoshi Son, the current Japanese economy would not have declined to this extent.

In the first place, at the time when it was called a 'trade barrier,' the Japanese semiconductor industry had far greater potential than the automotive industry, and it was the most important industry in Japan, to the point where it was called 'the rice of industry.' The person responsible for destroying that semiconductor industry is Masayoshi Son.

This maneuvering by Masayoshi Son is detailed in the book 'Masayoshi Son: The Young Lion of Entrepreneurship' by reporter Eiji Oshita, and the process by which Masayoshi Son destroyed TRON is depicted as non-fiction. At the time, Masayoshi Son was importing PC software from the US and running a business. However, he was concerned that if PCs using Japan's own technology became widespread, it would have a negative impact on his own business. Therefore, he utilized his connections with high-ranking officials at the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry), politicians, and business leaders, and even used American foreign pressure to exclude TRON from the market, dealing a serious blow to the Japanese semiconductor industry.

If Masayoshi Son had not engaged in such maneuvering, there is a possibility that Japan's current GDP would have surpassed that of the United States. In fact, around 1991, before the collapse of the bubble economy, the Japanese economy was in such excellent shape that it was estimated that the land value of Tokyo alone could buy the entire United States, and the Japanese semiconductor industry in particular boasted overwhelming competitiveness.

Due to the so-called 'land myth,' Japanese banks continued to provide excessive loans, and the Ministry of Finance's total volume control eventually triggered the collapse of the bubble economy. However, what is important here is the background of why people all over the world were able to believe in the land myth. The background to that was the phenomenal growth of the Japanese semiconductor industry.

Unlike agriculture or dairy farming, the semiconductor industry could produce in extremely small plots of land compared to large-scale farmland, and it was able to generate high profits through semiconductors, which are called 'the rice of industry.' Therefore, it was thought that the theoretical rise in land prices would continue indefinitely.

Through this series of events, Japan's semiconductor industry suffered a devastating blow. And now, as outlined in the following article, Masayoshi Son is attempting to inflict fatal damage on Japan once again through the 'Stargate' project.

In any case, the TRON case is an important lesson showing that technological innovation is not merely a technical competition, but is heavily influenced by political and economic factors. And it is an undeniable fact that Masayoshi Son has now established a position from which he could completely destroy the Japanese economy. If you do not want to see Japanese industry decline any further, boycotting SoftBank is considered the optimal solution for the Japanese people accordingly.

(2) Similarities and Differences with the Huawei Issue
Huawei had increased its presence in the global market through the advancement of its own communication and semiconductor technologies, but US sanctions made it difficult for them to procure advanced semiconductors. This issue, like the TRON case of the past, can be seen as a facet of the geopolitical conflict over technological hegemony.

However, the response to being targeted by a trade war from the United States differs greatly between Japan and China. Japan was talked into it by Masayoshi Son, and bureaucrats and politicians took the lead in inflicting devastating damage on their own semiconductor industry. On the other hand, Huawei did not succumb to US pressure and continued its research and development, and other semiconductor-related companies and ICT companies are also continuing to grow steadily so that they can compete in the global market with their own technology alone.

(3) Implications for Japan
The cases of TRON and Huawei suggest that for Japan to maintain its unique competitiveness in the semiconductor industry, it needs to strengthen its international political response capabilities while simultaneously promoting technological development.

4. Conclusion

The Japan-US semiconductor friction of the 1980s was one aspect of the 'success and pressure' experienced by Japanese companies. On the other hand, today's US-China semiconductor friction is unfolding within the broader context of 'technological hegemony' and 'national security.' For Japan, balancing the survival of its own industries with national security amidst global technological competition and political power games will be a major challenge moving forward.

I believe the above serves as a response to the many comments I have received so far. It is Masayoshi Son who has dealt a devastating blow to the Japanese economy, and the reason why Japan's generative AI is far inferior to China's is that the Japanese government and politicians have mistaken SoftBank board member Yutaka Matsuo for a leading expert in AI research and are being swayed by his misguided direction.

Dr. Ken Sakamura is a person who brought together 13 major companies representing Japan's semiconductor and ICT industries and led the TRON project on a private-sector basis. On the other hand, Yutaka Matsuo, also a professor at the University of Tokyo, is a board member of SoftBank, a company that is causing destructive damage to the Japanese economy, while serving as the chair of meetings that determine Japan's AI and ICT industrial policies.

In order to revive the Japanese economy, the most effective means would be to thoroughly exclude Masayoshi Son and Yutaka Matsuo from Japan's ICT industry and for consumers to boycott SoftBank.

Rintaro Takechi