Showcasing the power of comprehensive electronics engineering.

In recent decades, Japan has seen the rise of regional manufacturers like China, South Korea, and Taiwan, who have replicated the Japanese monozukuri process but at a lower labour cost, creating products that are cheaper, but have a higher rate of deficiency. This is especially true if we are talking about electronics and semiconductors, yet we still see Japanese firms maintaining their global leadership status, especially in the B2B market and niche fields, that are often characterized by a high-mix low-volume production. Can you tell us in your opinion why this is? How have these Japanese firms managed to maintain their global leadership status in the face of stiff regional competition?

Regarding your statement that Japan is maintaining its global leadership status, I would say that I am not confident that is true, but there may be some reasons why manufacturers in Japan are still surviving against this stiff global competition. One of these reasons is that Japan’s products continue to be high quality, sometimes a level of quality that is excessive compared to the global standard, but the high quality of products is one of Japan’s competitive edges. The other reason is that Japanese engineers diligently follow the monozukuri process, which might be driven by the culture of Japan, but is a big contributor to Japan’s competitive edge.

Regarding the semiconductor sector in Japan, it was largely dominating the world in the 70’s and 80’s thanks to its expertise in memories, including NAND and DRAM. In the early 2000’s, which were marked by a change in the market, the demand for LSI, such as microcontrollers and microprocessors overtook that of memories. Then, we saw Japan’s share of device production slowly decline with new companies such as TSMC was able to revolutionize the industry. However, we still see today that in auxiliary fields, Japanese firms are very much market leaders, and Japan is said to supply over 30% of globally consumed semiconductor materials. Could you explain to us what you think the role of Japan is in today’s modern semiconductor sector?

Over the course of history, Japan played a vital role in the semiconductor industry, especially when it comes to foundational components or materials for semiconductors. You talked about Japan having a large share for the materials, and I think that is true. For the materials needed for processing and materials like silicon wafers, Japan is still dominating in the world for this materials field. Also, the same holds true for the manufacturing equipment, with Tokyo Electron as one example, and Screen Holdings is contributing to the manufacturing equipment as well.

Some key backend processes are supported, largely by Japanese companies, because they have accumulated their technologies over the course of history and have advanced those technologies for the future. Japanese companies are indispensable for some of the key process steps, and that has already been established globally, so for those process steps, countries like China or Southeast Asian nations cannot replace Japan.

In recent months, there was a shortage of chips for semiconductors, which we saw a little bit before Covid-19, and then it was accentuated by Covid-19. Following that, we saw the big players like Intel, Samsung, and TSMC announce a big investment. Within the next 30 years, TSMC is hoping to build two new foundries in the United States, Samsung also said they will build a mega-foundry, and Intel announced that they will try to catch up. We are expecting a very big investment, a lot more fabs (semiconductor fabrication plants) to be added around the world. What impact do you think this will have on Daitron?

As you said, major semiconductor makers like TSMC, Intel and Samsung are increasing their investment, but that kind of investment will not give off a direct impact, especially on our sales volume. However, as they increase the amount of investment for the foundry, they will need to purchase the manufacturing equipment for semiconductors, so there will be more opportunities for Japan-made manufacturing equipment to be purchased by these companies. We supply a lot of components that are required for manufacturing equipment, and as the sales for the manufacturing equipment increases, we have good prospects for our sales of such components to increase as well, which is already happening in our company.

As for the wafers, the investment for them should be increasing because the usage rate for the wafer is currently increasing globally. We produce some original equipment for wafers, so as the makers increase their investments for their manufacturing processes, the sales for the manufacturing of wafers should increase as well and we are seeing that kind of virtual cycle for the wafers also.

Japan may not be the only advanced society that is aging, but they are at the forefront of this global trend that has major repercussions from a manufacturing standpoint. In the next 15 years, one in three Japanese people is expected to be 65 or older, which has two major repercussions. The first is a labour crisis, as it is harder and harder to find local talent and new graduates, recruit them and have them replace seasoned workers, to pass on the manufacturing knowledge to the next generation. The second problem is a shrinking of the domestic market, with fewer consumers, fewer companies, and eventually, fewer clients. Can you tell us what the impact of Japan’s demographic decline has been on Daitron and how you are going to overcome those challenges?

I think it is true that the Japanese population is declining, but we have not seen a direct impact on us yet. Every year, we hire 30 people from among new graduates, but that number is small, so we are not seeing a grave impact from the declining population. Areas like semiconductors or electronic components are kind of hot spots now and attract a lot of attention and interest from young people and college students, so we are not having any difficulty recruiting young talents right now.

The market for Japan will shrink going forward, but this is not true for the global market. I think we are in the middle of a transition period now, where we are turning our eyes more to the overseas market, and even though the market for Japan is going to shrink, we can cover that shortage with the overseas market. We have established a strategy to expand in the international market, so I do not think that we will receive any negative impact from the declining population. This expansion in the international market is a part of our growth strategy.

When we interviewed Shindengen, they talked to us about the limits that silicone wafers were reaching due to their properties. Semiconductors need to power their wafer tracks, and to that end, we are seeing new types of substrates such as silicon carbide, gallium nitride, and perhaps in the future, more gallium oxide. In comparison to their silicone counterparts, these wafers are a lot more fragile and are also smaller in shape, so they are harder to process and treat. Can you tell us how Daitron is responding to this new demand for compound semiconductors?

We have a lot of interest in these new materials, like silicon carbide and gallium nitride, because some materials required for the substrates for semiconductors are being replaced by these new materials. This is probably driven by the needs of power electronics, EV, and power generation companies, which are driven by the carbon neutral targets that are set recently. I believe that in the future, these new materials will dominate in the market, so we want to establish a business model that includes these materials.

The manufacturing equipment for silicon wafers that I mentioned has already been launched in the market, and if we slightly change these systems, we will be able to use this equipment for new materials like silicon carbide or gallium nitride. Some of this equipment is already being sold on the market, and we are getting a lot of inquiries about such manufacturing equipment.

You mentioned the edge grinder, and this equipment is an original product of ours that we can supply for the new materials as well. We are also focusing on the equipment that has been obtained by some of our partner makers, and we have a lot of expectations for the market for these new materials.

wafer edge grinding machine
CVP-3000 ： ｆor 300 mm diameter wafers

You mentioned the WBM-2200, which is kind of the industry standard for edge grinding for silicon wafers, and soon to be released is the CVP, a new model of the same type of machinery. You also have your solution-based products with the DAVI Engine, which is high-precision visual inspection equipment, offering both the DAVI-1200 and the DAL Pulse Engine. Could you elaborate more about your original products? What needs were you trying to meet when you developed them, and what are some of their advantages? What can your clients expect from the Daitron original product line?

You mentioned about the CVP, and that is the exact model we are going to launch as the new grinder for silicon carbide. It can deal with silicon wafers, but we are advancing in our development of new equipment required for these new materials like gallium nitride, so we are in the process of promoting our newly developed models for the grinders now. As for the DAVI engine, that was driven by the needs from customers for automation in the inspection process. Inspection by human beings is still important, but there are limitations to that, such as catching small scratches or measuring the size of a scratch.

The level of quality of the products produced by our clients is increasing, and as that increases, the importance of inspection also increases, so the needs for automation increase as well. We have established this DAVI Engine by incorporating AI technology to provide a stable and accurate inspection system for our clients, and we are trying to install this system in various kinds of equipment currently.

We know that you have three main business lines including electronic components, from connectors and semiconductors to flat panel displays; the manufacturing equipment we talked about before; and finally, visual inspection equipment. Can you tell us in more detail about what kind of synergies you have been able to create between these business lines and what benefits those synergies bring to your customers?

We do business with about 5,000 companies, and based on our functionality as a trading company, we are in an environment where we can collect a lot of different information from these customers, such as industry trends, new development plans, or problems they are facing. Based on that information, we can come up with new ideas for the products, combine that information with the existing products we have, and then propose a solution to the clients.

I think there is a synergy here where we can combine information with existing products, and sometimes, we combine that information with our original technology to give a better solution. That provides us with functionality as the manufacturer, and we sometimes incorporate our technology with the products we are dealing with to give a better solution for customers. We are seeing an increase in demands from customers while also seeing an increase in the number of industries that we are interacting with.

water-resistant connectors

You mentioned the 5,000 companies you work for, the amount of information you can gather from them, and collaboration. A very common theme in our interviews, and one I always want to touch on, is the importance of collaboration and cocreation. Especially internationally, finding local partners can be the key to unlocking and penetrating new markets. Just a few weeks ago, we were in Kyoto interviewing the president of Screen Holdings, and he really emphasized how important going to the United States was in their evolution, how finding local partners was key to unlocking not just the American market, but the entire North American market. Can you tell us more about what role cocreation plays in your business model and if you are currently looking for any new cocreation partners?

At this moment, we do not have any specific plan in process, but we have a lot of interest in cocreation, so if we find any opportunity for collaboration with international companies, we will not hesitate to go for it. As for what we would look for in finding international cocreation partners, the first thing would be unique technology from that company, and if we can find any technology that we do not already have, we would be interested in it. The second thing is the amount of information they have for the local market because that is also important, and the third thing is a distribution channel for the local market. If we can find a company that has good abilities in those three areas, we would certainly be interested.

Earlier, you mentioned that you have a specific strategy for tackling the international market, and as we know, Daitron has a diverse international profile. You have been present in Oregon since 1986, but are also in Malaysia, Hong Kong, Shanghai, Korea, and Thailand. Can you tell us more about this international strategy you mentioned before and if there are any key markets that you are prioritizing?

We place a lot of importance on Asian countries, including China, in terms of market. The areas we want to grow in going forward include North America and Europe, and those are the regions we are focusing on right now. We will continue to focus on the electronics industry, including electronic equipment and components based on industrial machinery, which is also relevant to semiconductors.

As for regions, we have a lot of focus on Asia and North America, and while we have a bit of a footprint in China already, we would like to increase the amount of satellite offices there as well as in North America going forward. At this moment, we do not have any operational sites in Europe, so we would like to have operational sites like sales offices there, and in Southeast Asia, we would like to have production sites, probably through cocreation.

If I am not mistaken, you recently became the president within the last year or two. Imagine that we have this interview again, on the last day of your presidency before you go to another job or retire. What objectives would you like to have achieved during your presidency at Daitron, and what is your main goal?

I would like to increase the sales share for the international market because it is at about 20-25% right now, and our current target is to get above 30%. I am not sure how long I will remain as the president, but my personal goal is to increase it to 50%.